PRC-1 · Chapter 3 · Question 81 of 100
A business regularly buys from and sells to the same entity. To offset the balances owed to each other, a 'contra entry' is made. What is the double entry in the control accounts?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Payables Control, Credit Receivables Control
Explanation
A contra settlement cancels out a mutual debt without cash. It reduces the liability owed to the supplier (Debit Payables Control) and simultaneously reduces the asset owed by the customer (Credit Receivables Control).
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