When goods are purchased on credit for resale, which double-entry treatment is normally made?
Correct answer: C. Debit purchases and credit accounts payable
- A. Debit cash and credit purchases
- B. Debit accounts payable and credit purchases
- C. Debit purchases and credit accounts payable
- D. Debit sales and credit accounts payable
Explanation
The purchase account is debited to record the cost of goods acquired, while the supplier's payable is credited because the liability increases. Cash is not involved in a credit purchase.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Accounting Principles
Accounting principles explain the rules used to record, classify and report business transactions. Coverage includes the accounting equation, double-entry system, accrual and cash bases, matching and prudence concepts, consistency, going concern, business entity, and the difference between capital and revenue items.
Practise Accounting Principles
351 free Accounting Principles MCQs from Accounting, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Accounting questions like this
Accounting is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Accounting Principles questions
Which transaction leaves the total amount of assets unchanged at the time it occurs?
Which expenditure is most likely to be treated as capital expenditure?
A loan received from a bank is normally classified in the business records as:
A business pays Rs. 25,000 to a supplier against an amount previously owed. What is the effect on the accounting equation?
Which rule correctly describes the normal effect of a debit entry?
A business completes consulting work in March but receives payment in April. Under accrual accounting, in which month is the revenue recognised?