PRC-1 · Chapter 2 · Question 12 of 100
'Omega Traders' owes Rs. 100,000 to 'Sigma Supplies', and 'Sigma Supplies' simultaneously owes Rs. 60,000 to 'Omega Traders'. They agree to offset the Rs. 60,000. In which book of prime entry is this contra settlement recorded?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) General Journal
Explanation
A contra settlement (offsetting receivables against payables) does not involve cash movement, inventory purchase, or inventory sale. Therefore, it is a non-routine adjustment recorded in the General Journal.
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