CIMA BA3 · Chapter 3 · Question 3 of 10
A business buys goods for resale on credit from a supplier. What is the double entry?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Debit Purchases, Credit Payables
Explanation
A credit purchase of goods for resale increases the purchases expense (debit) and creates a liability to the supplier (credit payables). No cash is paid at the time, so the bank account is not affected. Purchases are recorded in the purchases account during the year; inventory is adjusted only at the period end.
More Double entry bookkeeping and the accounting equation MCQs
- Q5A credit customer pays the amount owed by bank transfer. What is the double entry?
- Q6The receivables account of a business showed an opening debit balance of $4,200. During the month credit sales were $18,600, cash received…
- Q7Which of the following accounts would normally have a credit balance?
- Q8A business buys a machine on credit. What is the effect of this transaction on the accounting equation?
- Q9The following balances were extracted from a sole trader's ledger: capital $30,000, drawings $6,000, sales $85,000, purchases $52,000…