Select the entry that correctly records the receipt by Speedy Window Cleaning of $770 (including GST) collected from its customer Alan Lim for goods previously sold to him on credit.

Question

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Since Alan Lim was a customer who previously bought goods on credit and is now paying for those goods, it means that he is a debtor. Therefore, we should debit the debtor account for the $770 received. The money was received in the bank, so we should credit the bank account. There is also GST included in the amount received, so we should not credit income earned for the full $770. Instead, we should credit income earned for $700 (the amount excluding GST) and credit a separate account for GST collections for $70. Choice D correctly records the transaction by debiting the bank and creditor accounts.

Select the Entry That Correctly Records the Receipt by Speedy