PRC-1 · Chapter 2 · Question 73 of 100
A business agrees to offset a customer's debit balance of Rs. 8,000 against a credit balance of Rs. 12,000 owed to the same party in the payables ledger. What is the entry in the General Journal?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Payables Rs. 8,000; Credit Receivables Rs. 8,000
Explanation
A contra entry reduces both balances by the lower matching amount (Rs. 8,000). To reduce the liability, Debit Payables. To reduce the asset, Credit Receivables.
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