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CSEET · Fundamentals of Accounting · Accounting Process

Goods worth ₹12,000 are purchased on credit from Mehta & Co. Where is this entry posted in the ledger?

Purchases Account is debited and Mehta & Co. Account is credited. Goods came into the business, which increases purchases, and since payment is not made immediately, the supplier becomes a creditor, so the personal account of the supplier receives the credit.

  1. ADebit Purchases Account and credit Mehta & Co. AccountCorrect
  2. BDebit Mehta & Co. Account and credit Purchases Account
  3. CDebit Purchases Account and credit Cash Account
  4. DDebit Mehta & Co. Account and credit Cash Account

Explanation

Purchases is an expense/asset-type nominal account, so it is debited when goods come in. Mehta & Co. is a personal account of a creditor and is credited as the firm owes it money. Option B reverses the entry; C and D wrongly use cash though no cash was paid.

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