In the returns day book, which amounts are debited to the payables ledger control account?

In the returns day book, which amounts are debited to the payables ledger control account?

• A. Debit the payables ledger control account (the gross total); Credit the VAT control account (the VAT total); Credit the purchase returns account (the net total)
• B. Debit the VAT control account; Credit the payables ledger control account; Debit the purchase returns account
• C. Debit the purchase returns account; Credit the payables ledger control account
• D. Debit the payables ledger control account (the net total); Credit the purchase returns account (the gross total)

Answer: (A)

When goods are returned to a supplier, you’re reducing what you owe (the liability) and also adjusting the VAT and the purchases figure to reflect the return. In the returns day book, you post the full amount (gross) as a debit to the payables ledger control account. This shows the liability to the supplier decreasing by the total returned value. At the same time, you credit the VAT control account for the VAT portion, reducing the amount of input VAT you can reclaim. You also credit the purchase returns (a contra-purchases account) for the net amount, which adjusts the total purchases downward to reflect the return. So the postings are: debit the payables ledger control account with the gross total; credit the VAT control account with the VAT total; credit the purchase returns account with the net total. This combination correctly mirrors the reduction in liability, the reduction in VAT, and the reduction in purchases due to the return.

When goods are returned to a supplier, you’re reducing what you owe (the liability) and also adjusting the VAT and the purchases figure to reflect the return.

In the returns day book, you post the full amount (gross) as a debit to the payables ledger control account. This shows the liability to the supplier decreasing by the total returned value. At the same time, you credit the VAT control account for the VAT portion, reducing the amount of input VAT you can reclaim. You also credit the purchase returns (a contra-purchases account) for the net amount, which adjusts the total purchases downward to reflect the return.

So the postings are: debit the payables ledger control account with the gross total; credit the VAT control account with the VAT total; credit the purchase returns account with the net total. This combination correctly mirrors the reduction in liability, the reduction in VAT, and the reduction in purchases due to the return.