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GCE Financial Accounting 1990 Question 1

Question 1

Control Accounts

Prof. Bush who had two accounts with Olive Brother agreed to have only one balance outstanding. By which of the following methods could this be effected?

  1. A.Journal entry
  2. B.Double entry
  3. C.Suspense Account entry
  4. D.Adjustment entry
  5. E.Contra entry.
Show the answer and explanation

Answer: E (Contra entry.)

Explanation

Setting one balance off against the other (he is both a debtor and a creditor) is a contra entry.