Chapter 12 Trade Payables (TP) PDF

CHAPTER 12 TRADE PAYABLES (TP) A trade payable is a supplier whom the business bought on credit from. It is a liability, and is credit in nature. Journal entry Journal Date Particulars Dr Cr...

CHAPTER 12 TRADE PAYABLES (TP) A trade payable is a supplier whom the business bought on credit from. It is a liability, and is credit in nature. Journal entry Journal Date Particulars Dr Cr $ $ 2021 Jan 6 Inventory (A+) 4 500 Trade payable Eugene (L+) 4 500 Bought goods on credit from supplier Eugene. Jan 12 Trade payable Eugene (L-) 270 Inventory (A-) 270 The business returned goods to credit supplier Eugene. Jan 29 Trade payable Eugene (L-) 6 000 Cash in hand / cash at bank 5 880 Discount received 120 Paid credit supplier Eugene cash/cheque to settle $6000 owing after $120 cash discount received. Jan 31 Inventory (A+) 100 Trade payable Eugene (L+) 100 Credit purchases made on 6 Jan was undercharged. JYSS: POA FORMAT & MEMORY ESSENCE | P a g e 79  Trade Payable Ledger account (with discounts & source documents) For TP acc, particulars Business owes Business owes cannot be: supplier supplier Sales revenue, sales returns Eugene less Eugene more or cost of sales Because the biz is not selling but buying goods (Liability) Trade payable Eugene account Dr $ Cr $ Source Particulars Bal $ 2021 – + document Jan 1 Balance b/d 7 500 Cr 6 Inventory (90%x5000) 4 500 Invoice 12 Inventory (90%x300) 270 Credit note Payment 29 Cash in hand / cash at bank (98%x6000) 5 880 voucher Discount received 29 120 - (2%x6000) 31 Inventory 100 5 830 Cr Debit note Feb 1 Balance b/d 5 830 Cr Date Interpretation of Ledger Account Remarks Jan 1 $7 500 was owed to credit supplier Eugene from the previous month. Jan 6 Bought goods worth $4 500 on credit If Qn states list price $5000 less 10% trade discount, only the 90% owed to Eugene is from supplier Eugene. recorded. 10% trade discount is not recorded. Jan 12 The business returned goods worth $270 If Qn states list price $300, the trade discount given earlier when the goods was purchased should also to credit supplier Eugene. apply to the returns of the same batch of goods. If Qn states net price $270, no further working will be needed. Jan 29 Paid credit supplier Eugene ‘Settle’ means the business no longer owes cash/cheque to settle $6000 owing after supplier $6000, for 2 reasons: The 98% paid and the 2% discount. 2% cash discount was received. Cash discount must be recorded. Jan 31 Credit purchases made on 6 Jan was The double entry for invoice and debit note is the undercharged. same. Feb 1 $5 830 owed to credit supplier Eugene was brought down from Jan to Feb. Cash purchases is NOT recorded in TP account because the double entry is: Dr Inventory (A+) Cr Cash at bank / Cash in hand (A-) Refer to Chapter 2 for source documents and Chapter 4 for discounts. JYSS: POA FORMAT & MEMORY ESSENCE | P a g e 80