Trade payables

Trade payables

Chapter 12

Let's recap about Trade Payables

Get ready for the quiz....​

Multiple Choice

Trade Payable is the______?

• amount owing to customers

• amount owing to suppliers

• amount owing to banks

• amount owing to business

Multiple Choice

Trade payable is amount owing to suppliers when businesses_______

• buys goods only on credit 

• spend on expenses only on credit

• buy goods and non-current assets on credit

• receive income on credit

Multiple Choice

Trade payable is a ______

• current asset

• non-current asset

• current liability

• non-current liability

Multiple Choice

Trade payable account is _______?

• DR in nature

• CR in nature

Multiple Choice

Trade payable is recorded in the ______

• statement of financial performance

• statement of financial position

Multiple Choice

Buying goods and non-current asset on credit means______

• payment has been made immediately.

• payment is made at a later date.

• payment is made in advance.

Multiple Choice

Trade payable account increases when_______

• Cash Discount is given by credit suppliers

• payment is made to credit suppliers

• goods and non-current assets are returned

• goods and non-current assets are purchased on credit

Multiple Choice

Goods are bought on credit from supplier.

• DR Trade payable CR Inventory

• DR Inventory

  CR Trade payable

• DR Trade receivable

  CR Sales revenue

• DR Trade payable

  CR Sales revenue

Multiple Choice

Non-current assets are bought on credit from supplier.

• DR Trade payable CR Inventory

• DR Non-current asset

  CR Trade payable

• DR Trade receivable

  CR Non-current asset

• DR Trade payable

  CR Non-current asset

Multiple Choice

Goods are returned to credit supplier

• DR Trade payable CR Inventory

• DR Inventory

  CR Trade payable

• DR Trade receivable

  CR Sales revenue

• DR Trade payable

  CR Sales revenue

Multiple Choice

Payment by cheque is made to credit supplier.

• DR Trade payable CR Inventory

• DR Inventory

  CR Cash at bank

• DR Cash at bank

  CR Trade payable

• DR Trade payable

  CR Cash at bank

Trade Discount vs Cash Discount​

Let's recap​

​Trade Discount

​Trade discount is a reduction off a list price

• ​given at the point of purchase/sales.

• ​not recorded in the ledger.

​

​E.g. Bought goods costing $300 on credit from supplier. A trade discount of 10% was given by supplier. 

​

​DR Inventory (+A) 270

​ CR Trade payable (90% x 300) (+L) 270

Open Ended

Purchased goods on credit at a list price of $500 less a 10% trade discount. 

(Please write in a single line: DR .___ XX CR ___ XX)

Cash Discount

Cash discount is a reduction off a invoiced amount (amount owing)

• ​given upon payment made (promptly)

• is recorded in the ledger as

​ - discount allowed (credit sales)

​- discount received (credit purchase)

​

​

Cash Discount

E.g. The business owes the supplier $500.

Business issued a cheque to pay credit supplier amount owing of less 10% cash discount.

​

​DR Trade payable (-L) 50

​ CR Discount received (10% x 500) (+I) 50

​

​DR Trade payable (-L) 450

​ CR Cash at bank (90% x 500) (-A) 450

​

Open Ended

Paid credit supplier by cheque for amount owing of $1000 less 10% cash discount.

(Single line/continuously): DR .___ XX CR ___ XX DR____ CR_____)

Open Ended

Paid supplier $250 by cheque as a full settlement of amount owing $260.

(Single line/continuously): DR .___ XX CR ___ XX DR____ CR_____)