Home For AAT student members AQ 2013 AAT Level 2 (Level 5 in Scotland)
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚

Double entry for the bank and expense account for a credit transaction

Hi guys,

This is my first question on here so I'm sorry if I'm in the wrong place or talking nonsense. I'm sure this is has an obvious answer but I've done quite a bit of reading on Double Entry and am still left with the following question mark at the end of this scenario. I would really appreciate any help.

So the scenario is that the business, has just made a credit purchase for £100 for either a business expense or stock purchase to their supplier. The double entry for this as far as I understand would be £100 debit to either the Expense or Purchase account (depending on what is being bought) in the general ledger and a credit of £100 in the Purchase Ledger Control Account.

There's then another entry that goes in to the individual suppliers account contained in the Purchase Ledger. But as I understand it this is only a single entry and not part of the double entry system.

So I'm all good up until here... I think. Then a month later the £100 invoice is paid by the business to the supplier. Once the payment comes out of the bank account it is then posted as a credit for £100 to the Cash account in the general ledger and the double entry here I'm assuming would be to the Purchase Ledger Control Account where that would be £100 debit.

Assuming that I have got the above correct (or if not, any guidance on how and why it's not would be really helpful) then my question is what happens to the expense account which still has a DR balance of £100. As the payment has now been made that DR has been cleared, but if I put a CR for £100 in to it I have nowhere else left for another double entry point. Does the expense account just get left, but if so it would be showing an inaccurate balance of £100 owing when in fact there's not.

Can someone please help me? I'm quite confused.

Thank you.


Sign In or Register to comment.