Anonymous asked in Business & FinanceOther - Business & Finance · 3 years ago

Why did we debit and credit this?

Bought goods on credit from B.Hind £1,455

I understand why we debited the purchased because it is increased. But why are we crediting B.Hind?

We returned goods to B.Hind £82.

What happens here?

Sold goods on credit to P. Syme.

I'm guessing we credit the sales since it's decreasing, so why do we debit P.Syme then? Or?

2 Answers

  • 3 years ago
    Favorite Answer

    DR: Purchases

    CR: Accounts payable (B Hind)

    The business has a liability to B Hinds to pay for the goods/services supplied. The credit shows the liability.

    When goods are returned

    DR: Accounts payable

    CR: Purchase returns

    DR: Accounts receivable (P Syme)

    CR: Sales

    Sales account increases (credit), and money is owed to the business by P Syme, shown as accounts receivable asset.

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  • 3 years ago

    It's simple double entry bookkeeping and I assume that this is part of your coursework/homework.

    You should have listened in class.

    Here's a quick rundown to guide you:

    1. Debit Purchases, credit Trade Creditor.

    2. Credit Purchases, debit Trade Creditor.

    3 Credit Sales, debit Trade Debtor.

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