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Difficulty: EasyPurchases Ledger Control Account

Match each transaction item affecting the Purchases Ledger Control Account with its appropriate debit or credit entry classification.

  • Credit PurchasesCredited to Purchases Ledger Control Account to record an increase in trade payables liability
  • Discount ReceivedDebited to Purchases Ledger Control Account to reflect a reduction in amount owed due to early payment allowance
  • Dishonoured Cheques Paid to SuppliersCredited to Purchases Ledger Control Account to reinstate the liability after a payment cheque is rejected by the bank
  • Returns OutwardsDebited to Purchases Ledger Control Account to reduce trade payables for goods returned to suppliers

Answer

Credit Purchases matches with Credited to record an increase in payables; Discount Received matches with Debited to reflect a reduction in owed amounts; Dishonoured Cheques match with Credited to reinstate liability; Returns Outwards matches with Debited to reduce trade payables.
The Purchases Ledger Control Account acts as a summary of the accounts payable ledger. Credit purchases increase the liability to suppliers (credited), while dishonoured cheques reinstate a previously reduced liability (credited). Conversely, allowances like discounts received and returns of merchandise lower the payable amount (debited).

Step-by-Step Solution

1
Identify transactions that increase trade payables liability
Credit purchases and dishonoured cheques increase liability.
Control accounts track total balances; items increasing trade liability belong on the credit side of the Purchases Ledger Control Account.
2
Identify transactions that decrease trade payables liability
Discount received and returns outwards decrease liability.
Reductions in payable balance belong on the debit side of the Purchases Ledger Control Account.
3
Pair each left item to its corresponding right item description
Matches established: left_1 to right_1, left_2 to right_2, left_3 to right_3, left_4 to right_4.
Direct alignment of basic double entry control rules for trade payables.

Key Concept

Purchases Ledger Control Account Debit and Credit Classifications
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Topics

Purchases Ledger Control Account

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