AAT Level 2 Question Bit Unsure

Stock is bought for resale at a later date using a cheque. What is the dual effect of this?

I'm not sure how to answer this question. Any help would be great.

Thanks.

Comments

  • N4TN4T Posts: 191AAT Student
    Hi @gareth1985 ,

    The way I tackle this is first determine whether it is MONEY IN (income,receipts) or MONEY OUT (payment, expenses).

    This works out if it should be DR or CR BANK.

    Here the business has paid for purchases with a cheque. This is MONEY OUT of the bank account therefore is
    CR BANK

    The other side of the double entry is DR PURCHASES.

    Are you okay with why it is credit bank? or were you having problems with which account to credit/debit?

    The latter you'll pick up the more questions you practice.
  • gareth1985gareth1985 Posts: 24Registered
    Hi there,

    thanks for the reply.

    I was just not sure what to write as my answer. I'm happy to go for the answer at the bottom of this page, unless you or someone else suggests not to otherwise. Yes I'm okay with why it is called a credit bank because of the money going out the bank, and the debit purchases is the money going into the other persons account, is that correct?


    Debit Purchases
    Credit Bank



  • N4TN4T Posts: 191AAT Student
    @gareth1985

    It's debit PURCHASES because the expenditure falls within the "purchases account".

    Stock bought for resale belongs to the purchases account as with materials used in manufacturing.

    If the business purchased a computer with the cheque it will be DR COMPUTER CR BANK.




  • gareth1985gareth1985 Posts: 24Registered
    Ah okay, got ya :)

    Thanks a lot for your help. Everything is very clear now.



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