Kingston Supplies bought $20 000 worth of goods from Princetown Pty Ltd on credit. Before payment was made Princetown, in turn, purchased $8000 worth of supplies on credit from Kingston Supplies. The general journal entry to be recorded in the books of Kingston Supplies to offset the amount owing to it against the amount it owes is:

Question

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Since Princetown owes Kingston $8,000, Kingston can offset that amount against the $20,000 that Princetown owes them. Therefore, Kingston only needs to record the net amount owed to them by Princetown, which is $12,000 ($20,000 - $8,000). This can be achieved by debiting Accounts payable, Princetown Pty Ltd $8,000 and crediting Accounts receivable, Princetown Pty Ltd $8,000.

Kingston Supplies Bought $20 000 Worth of Goods from Princetown