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WAEC Financial Accounting 2021 Question 20

Question 20

Double Entry and the Ledger

Lima paid off debt of D 2,500 owed to Dongo by cash. The entries in Lima's books are: debit

  1. A.Cash D 2,500; credit Dongo D 2,500
  2. B.Dongo D 2,500; credit cash D 2,500
  3. C.Bad debt D 2,500; credit Dongo D 2,500
  4. D.Dongo D 2,500; credit Bad Debt D 2,500
Show the answer and explanation

Answer: B (Dongo D 2,500; credit cash D 2,500)

Explanation

Paying a creditor reduces the liability (debit Dongo) and cash (credit cash).