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Questions and Answers
What was the initial amount credited to trade payable Eugene on January 6?
What was the initial amount credited to trade payable Eugene on January 6?
What amount was debited to trade payable Eugene on January 12?
What amount was debited to trade payable Eugene on January 12?
How much cash did the business actually pay to settle the account with trade payable Eugene on January 29?
How much cash did the business actually pay to settle the account with trade payable Eugene on January 29?
What was the nature of the entry made on January 31?
What was the nature of the entry made on January 31?
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What type of account does trade payable represent?
What type of account does trade payable represent?
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What is the balance carried forward in the Trade Payable Ledger account on February 1?
What is the balance carried forward in the Trade Payable Ledger account on February 1?
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What does the 'Dr' in the Trade Payable Ledger account represent?
What does the 'Dr' in the Trade Payable Ledger account represent?
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How much cash was paid to supplier Eugene on January 29?
How much cash was paid to supplier Eugene on January 29?
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Which transaction indicates a return of goods purchased on credit?
Which transaction indicates a return of goods purchased on credit?
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Why was the trade discount of 10% not recorded in the ledger?
Why was the trade discount of 10% not recorded in the ledger?
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What type of account does the Trade Payable Ledger represent?
What type of account does the Trade Payable Ledger represent?
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How is the amount of $100 on January 31 recorded?
How is the amount of $100 on January 31 recorded?
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What percentage of the inventory cost was recorded for the January 6 purchase?
What percentage of the inventory cost was recorded for the January 6 purchase?
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Study Notes
Trade Payable Ledger Account
- Trade Payable (TP) Ledger Account - A record of transactions with a specific supplier, in this case, 'Eugene'.
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TP Account Columns:
- Debit (Dr): Amount the business pays the supplier.
- Credit (Cr): Amount the business owes the supplier (liability).
- Balance (Bal): Remaining balance owed.
- Source: Documents supporting the transaction (Invoice, Credit Note, Payment Voucher, Debit Note).
- Date: The date of the transaction.
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TP Account Particulars:
- Inventory: Includes purchases and returns of goods.
- Discount Received: Reduction in the amount payable to the supplier.
- Cash in Hand/Cash at Bank: Indicates cash or bank transfers used to settle the debt.
Trade Payable Account Example: Eugene
- Beginning Balance (Jan 1): $7,500 owed to Eugene.
- Purchases (Jan 6): Business buys goods worth 4,500(904,500 (90% of 4,500(905000, after 10% trade discount).
- Returns (Jan 12): Business returns goods previously bought for 270(90270 (90% of 270(90300, after trade discount).
- Payment (Jan 29): 6000owingtoEugeneissettledwitha6000 owing to Eugene is settled with a 6000owingtoEugeneissettledwitha120 cash discount.
- Undercharge (Jan 31): Inventory previously purchased was underpriced, resulting in an increase of $100 in what is owed.
- Ending Balance (Feb 1): $5,830 owed to Eugene.
Trade Payable
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Definition: A trade payable is a supplier whom the business purchased goods or services on credit from.
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Nature: A liability, represented on a balance sheet as a credit.
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Journal Entries: The following are examples of journal entries for trade payable transactions:
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Purchase on Credit:
- Debit: Inventory (asset increase)
- Credit: Trade Payable (liability increase)
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Returns to Supplier:
- Debit: Trade Payable (liability decrease)
- Credit: Inventory (asset decrease)
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Cash Payment:
- Debit: Trade Payable (liability decrease)
- Credit: Cash in Hand/Cash at Bank (asset decrease)
- Credit: Discount Received (revenue increase)
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Undercharge Adjustment:
- Debit: Inventory (asset increase)
- Credit: Trade Payable (liability increase)
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Purchase on Credit:
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Description
This quiz explores the features and functionalities of a Trade Payable Ledger Account, specifically focusing on transactions with the supplier, Eugene. Key concepts include debits, credits, balance calculations, and supporting documents such as invoices and payment vouchers.
