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JAMB Principles of Accounts 2005 Question 3

Question 3

Double Entry and the Ledger

The journal entries for the purchase of stock on credit are to debit

  1. A.stock account and credit cash account
  2. B.stock account and credit liability account
  3. C.purchase account and credit liability account
  4. D.suspense account and cash account
Show the answer and explanation

Answer: C (purchase account and credit liability account)

Explanation

Goods bought for resale are debited to purchases, and the supplier (a liability) is credited because nothing has been paid.