In April, Gina received credit notes from her suppliers for equipment hire services which were ordered and invoiced but never provided. The credit notes total up to £7,200 which includes VAT of 20%. What is the correct double entry to record these credit notes in Gina's books of account?

Question

Quizplus · Accepted Answer

The correct double entry to record the credit notes involves debiting the trade payables control account to reduce the liability owed to suppliers by £7,200, and crediting both the equipment hire expense account to reverse the expense by £6,000 (the net amount excluding VAT) and the VAT account by £1,200 to account for the VAT portion of the credit note. This reflects the reduction in expenses and the reclaimable VAT.

In April, Gina Received Credit Notes from Her Suppliers for Equipment