Tandi's Cycles buys parts on credit from three suppliers. Its April dealings with them are listed below. The shop owed Etosha Cycle Parts $760 on 1 April an...
Question 1 Report
Tandi's Cycles buys parts on credit from three suppliers. Its April dealings with them are listed below. The shop owed Etosha Cycle Parts $760 on 1 April and paid that supplier $700 by cheque on 20 April, receiving $40 discount.
| Date | Supplier | Transaction | $ |
|---|---|---|---|
| 2 | Etosha Cycle Parts | Bought on credit | 1 450 |
| 8 | Swakop Components | Bought on credit | 980 |
| 11 | Swakop Components | Returned | 130 |
| 15 | Etosha Cycle Parts | Bought on credit | 620 |
| 23 | Oshana Tools | Bought on credit | 1 340 |
| 26 | Etosha Cycle Parts | Returned | 215 |
- Enter the credit purchases in the purchases journal and total it (5)
- Draw up the purchases returns journal and show its total (4)
- Write up the purchases ledger account of Etosha Cycle Parts, balancing it on 30 April and bringing the balance down (6)
Answer Details
(a) Purchases journal for April [5]
Only credit purchases of goods for resale are listed here. The two returns are excluded because they belong in their own journal.
| Date | Supplier | $ |
|---|---|---|
| 2 | Etosha Cycle Parts | 1,450 |
| 8 | Swakop Components | 980 |
| 15 | Etosha Cycle Parts | 620 |
| 23 | Oshana Tools | 1,340 |
| Total, posted to the debit of the purchases account | 4,390 | |
$1,450 + $980 + $620 + $1,340 = $4,390. Each individual amount is posted to the credit of the supplier's account in the purchases ledger; only the total goes to the general ledger.
(b) Purchases returns journal for April [4]
| Date | Supplier | $ |
|---|---|---|
| 11 | Swakop Components | 130 |
| 26 | Etosha Cycle Parts | 215 |
| Total, posted to the credit of the purchases returns account | 345 | |
$130 + $215 = $345. The total is credited because returns cancel part of the debit already made to purchases, and each individual amount is debited to the supplier concerned, reducing what is owed.
(c) Etosha Cycle Parts account in the purchases ledger [6]
| Debit | $ | Credit | $ |
|---|---|---|---|
| 20 Apr Bank | 700 | 1 Apr Balance b/d | 760 |
| 20 Apr Discount received | 40 | 2 Apr Purchases | 1,450 |
| 26 Apr Purchases returns | 215 | 15 Apr Purchases | 620 |
| 30 Apr Balance c/d | 1,875 | ||
| Total | 2,830 | Total | 2,830 |
| 1 May Balance b/d | 1,875 |
A supplier is a trade payable, so amounts owed are credits: $760 + $1,450 + $620 = $2,830. Everything that reduces the debt is debited: the $700 cheque, the $40 discount received for prompt payment, and the $215 of goods sent back, a total of $955. The balance carried down is $2,830 - $955 = $1,875, brought down on the credit side because the shop still owes it. A frequent error is entering the cheque at $740 by adding the discount to it; the bank column must show only the money that actually left, with the discount as a separate credit in the cash book and a separate debit here.
Download The App On Google Playstore
Everything you need to excel in your exams
