Chapter 4

Question 1

Crimson plc paid an invoice from a credit supplier and took advantage of the early settlement
discount offered. When the invoice was received and recorded, Crimson plc did not expect to take
the discount.
Requirement
The journal entry to record the payment of the invoice is:
A Debit Payables, Credit Purchases, Credit Cash at bank account
B Debit Payables, Credit Cash at bank account
C Debit Cash at bank account, Debit Purchases, Credit Payables
D Debit Cash at bank account, Credit Purchases, Credit Payables

Answer 1

A - from the point of view of PURCHASING goods. so the opposite way around.

Question 2

6 Winn Ltd has opening trade payables of £24,183 and closing trade payables of £34,655. Purchases
for the period totalled £254,192 of which £31,590 related to cash purchases.
Requirement
Total payments recorded in the payables ledger for the period were:
A £212,130
B £233,074
C £243,720
D £264,664

Answer 2

A £212,130

Do purchases payable - (purchases - cash payments)

Add this to the b/f balance.

Then subtract closing balance to know how much was paid - so Dr payables to get to the closing balance.