PRC-1 · Chapter 3 · Question 20 of 100
If 'Zephyr Tech' utilizes a contra settlement to offset Rs. 10,000 owed to a supplier who is also a customer, what is the correct double entry recorded in the main ledgers?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Debit Trade Payables Rs. 10,000, Credit Trade Receivables Rs. 10,000
Explanation
A contra settlement offsets a mutual debt. It simultaneously reduces the liability owed to the supplier (Debit Trade Payables) and reduces the asset owed by the customer (Credit Trade Receivables).
More Ledgers and Trial Balance MCQs
- Q22Which of the following scenarios describes a 'Compensating Error' that will remain undetected by a Trial Balance?
- Q23When extracting a trial balance, which of the following accounts will typically present a credit balance?
- Q24Which of the following statements comprehensively defines the 'General Ledger'?
- Q25After extracting a trial balance, the accountant of 'Dynamic Corp' notices the debit column totals Rs. 500,000 and the credit column…
- Q26What is the correct double-entry sequence to formally transfer a net profit of Rs. 250,000 to the owner's equity at year-end?