During January, Meera Limited makes credit purchases of goods for resale at a net cost of £42,000. Meera Limited's suppliers charge 20% VAT on the net cost of purchases. What is the correct double entry to record these credit purchases of goods for resale?

Question

Quizplus · Accepted Answer

The correct double entry to record these credit purchases includes debiting the purchases account for the net cost (£42,000), debiting the VAT account for the VAT on purchases (£8,400, which is 20% of £42,000), and crediting the trade payables control account for the total amount payable (£50,400, which is the sum of the net cost and the VAT).

During January, Meera Limited Makes Credit Purchases of Goods for Resale