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Accounts Payable
At Oct 1, 2007, Kreet Industries had an accounts payable balance of $30,000. During the month, the company made purchases on account of $25,000 and made payments on accoount of $40,000. At Oct 31, 2007, the accouts payable balance is?
- 15,000 credit -30,000 debit -40,000 credit -10,000 credit Wouldn't it be a 30,000 credit still because payments and purchases made "on account" don't get recorded until they are used? |
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Hi there The AP balance is $15,000 at Oct 31. AP is increased when a purchase is made on account and the goods have been received - it is not when the goods are used. Payments on account are a debit to AP as soon as the cheque is cut - we do not wait until the cheque is cashed. Hope this helps! |
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