Charles Limited runs a retail furniture operation. Charles Limited receives a delivery of tables and chairs with a cost of £22,000 from a supplier. Charles Limited will pay for these goods in 30 days' time. Which one of the following is the correct double entry to record this transaction in Charles Limited's books of account?

Question

Quizplus · Accepted Answer

When goods are purchased on credit, the double entry is to debit the purchases account to reflect the increase in inventory (or expense if they are immediately expensed) and credit the trade payables account to reflect the amount owed to the supplier. This records the obligation to pay the supplier in the future without affecting cash at the time of the transaction.

Charles Limited Runs a Retail Furniture Operation