Purchases / Sales on credit terms (ledger accounts)

Hello All,

Hopefully someone will be able to help me with this query of mine, I am currently studying Level 2 AAT Accountancy provided by The Skills Network. I have completed many pages of Unit 1 and have haulted at "ledger accounts".

I understand that every Credit must have a Debit and every Debit must have a Credit (Dual Effect) and I understand that concept of Double Entry Bookkeeping however transactions which involve "Credit Terms" seem to be causing some difficulty for me.

Has anyone got a easier way to remember what is credited and what is debited.

example question in-case the above did not make sense.

VML purchased goods for resale on credit terms for £4,600, what is credited and what is debited?

Hopefully the above makes sense, thank you in anticipation for your help!

Best Answer

Answers

  • MrMatthewByfordMrMatthewByford Posts: 5Registered
    nickyowl said:

    Hi - you would DR Purchases (and asset) and CR the Purchase Ledger Control Account (a liability as you still owe this money)

    When I first started learning about bookkeeping (many years ago!) we were taught PEARLS to remember debits and credits
    PEA / RLS
    Purchases
    Expenses
    Assets
    are Debits

    Revenue
    Liabilities
    Sales
    are Credits

    Now that makes more sense! See ive been taught. Dead and Clic which does help its just I cant relate in credit terms to this acronym. Thank you!
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