Below is a list of accounting transactions on the left and their respective posting rules in the Purchases Ledger Control Account on the right. Match each transaction item with its correct entry placement and double-entry accounting effect.
- Interest charged by creditors on overdue supplier accountsCredited to Purchases Ledger Control Account to increase trade payables
- Returns outwards of damaged goods to suppliersDebited to Purchases Ledger Control Account to reduce trade payables
- Contra set-off agreement between Purchases Ledger and Sales LedgerDebited to Purchases Ledger Control Account to offset accounts receivable balance
- Cheque previously paid to a trade creditor returned dishonouredCredited to Purchases Ledger Control Account to reinstate creditor liability
Answer
Interest charged on overdue accounts matches with being credited to increase trade payables; Returns outwards match with being debited to reduce trade payables; Contra set-off matches with being debited to offset accounts receivable balance; Dishonoured cheque matches with being credited to reinstate creditor liability.
Each accounting item is paired according to its double-entry effect on total creditors. Items increasing liabilities (interest charged, dishonoured cheques) are placed on the credit side, while items decreasing liabilities (returns outwards, contra set-offs) are placed on the debit side.
Step-by-Step Solution
Key Concept
Purchases Ledger Control Account Posting Rules