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CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Cycle

A ledger account of Kapoor Supplies (a creditor) in the books of Gupta Traders shows: credit purchases Rs 90,000; payment by cheque Rs 50,000; discount received Rs 1,500; goods returned Rs 6,000; further credit purchases Rs 20,000. Bills payable of Rs 10,000 were also accepted in favour of Kapoor. What is the closing balance?

The closing balance is a credit balance of Rs 42,500. Credits total Rs 1,10,000 from purchases, while debits total Rs 67,500 from the cheque, discount, returns and the accepted bill. The difference is Rs 42,500 still payable to Kapoor Supplies.

  1. ACredit balance Rs 42,500Correct
  2. BCredit balance Rs 52,500
  3. CCredit balance Rs 62,500
  4. DDebit balance Rs 2,500

Explanation

Credit side: 90,000 + 20,000 = 1,10,000. Debit side: 50,000 + 1,500 + 6,000 + 10,000 (bill accepted settles the debt) = 67,500. Balance = 1,10,000 - 67,500 = Rs 42,500 credit. Omitting the bill gives Rs 52,500, which is wrong because acceptance of a bill discharges the account.

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