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ACCA Applied Knowledge · Financial Accounting · Receivables and payables

At 31 March, Harlow Co's payables ledger account for supplier Denby shows a credit balance of $8,400. Denby's statement shows $9,150 owing. Investigation shows that Denby's statement includes an invoice for $750 for goods which Harlow has not yet recorded, although the goods were received before 31 March. What is the correct action in Harlow's books?

Harlow should record the unrecorded invoice by debiting purchases $750 and crediting Denby's payables ledger account $750. The goods were received before the year end, so the liability exists. The ledger balance then becomes $9,150, agreeing with the supplier's statement.

  1. ADebit purchases $750 and credit payables ledger (Denby) $750Correct
  2. BDebit payables ledger (Denby) $750 and credit purchases $750
  3. CMake no entry because the difference is a timing difference
  4. DReduce the supplier statement balance by $750 and leave the ledger unchanged

Explanation

The goods were received before the year end, so the liability exists and the invoice must be recorded. Debit purchases (or inventory) and credit Denby's account with $750, giving $9,150 which agrees to the statement. Option B reverses the entry and would widen the difference.

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