What is the correct accounting treatment for the transfer of a debit balance from the trade...

Question:

What is the correct accounting treatment for the transfer of a debit balance from the trade payables ledger to the trade receivables ledger?

Trade receivables control Trade payables control
(1) Credit Credit
(2) Debit Debit
(3) Credit Debit
(4) Debit Credit
(5) No entry Debit

What Are Trade Receivables:

A company's Trade Receivables is reported as part of Accounts receivable on the balance sheet as assets. Trade Receivables initially arise when a company makes a sale to a customer and, instead of paying cash immediately, the customer promises to pay in the future.

Answer and Explanation:

We have to credit payables since we need to bring it back to $0, while we need to debit receivables since we are transferring over a balance.

  • The answer is thus #4.

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Credit Policy & Receivables

from Finance 101: Principles of Finance

Chapter 19 / Lesson 1
3.4K

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