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• # 72376
• Mon 20 Jun 2011 09:07 PM

i have had an assignment returned as 2 questions were wrong, just need some advice please....

question 1

1)           You return some goods worth £100 Net, would you.....

a.      Credit Purchases account

b.      Credit Purchase Returns account

c.      Debit Purchase Returns account    (my answer)

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• # 72377
• Mon 20 Jun 2011 09:16 PM

1)  the answer is 'credit purchase returns account'.  Remember when you purchase something you debit the purchase account and it sits on the left hand side of the trial balance.  If you return it you don't want it to sit on the left hand side anymore, therefore you must credit it to purchase returns and therefore place it on the right hand side of the trial balance.  The only reason we use purchase returns account is to keep track of what has been returned, otherwise we would credit it to purchases.

2) a bank is a business too and any money they owe to a customer is a credit balance to them; and any money that the customer owes them (eg. a mortgage) represents a debit balance to the bank. 

Therefore a credit balance is in fact  an overdrawn account, ie an account with a negative balance.

Please correct me someone if I've got this wrong! 

• Debbie
  www.beckcottage.com
  
  

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• # 72378
• Mon 20 Jun 2011 10:23 PM

Don't panic Debbie, you're right!

Can't add to your replies as I think you've answered them really clearly 

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