A sole trader buys goods on credit for resale. Which account is credited when the purchase is recorded?
Correct answer: D. Trade payables account
- A. Purchases account
- B. Cash account
- C. Capital account
- D. Trade payables account
Explanation
A credit purchase increases the amount owed to the supplier, so Trade Payables is credited. The Purchases account is debited to record the cost of goods acquired for resale.
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About Financial Statements of Sole Traders
Sole trader statements calculate revenue, cost of sales, gross profit, operating expenses and net profit, then present assets, liabilities and owner’s capital in the statement of financial position. Adjustments for closing inventory, accruals, prepayments, depreciation, bad debts, drawings and additional capital connect the two statements.
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