Answer to Question #190893 in Accounting for Milan

Question

Debit Accounts Payable

Credit Cash

Credit Purchases/Discounts

• What does this journal entry mean?

Debit Cash

Credit Notes Payable

• What does this journal entry mean?

Debit Inventory/Purchases

Credit Accounts Payable

• What does this journal entry mean?

Debit Cash

Credit Interest Revenue

• What does this journal entry mean?

Debit Notes Receivable

Credit Discount on Notes Receivable

Credit Cash

• What does this journal entry mean?

Debit Discount on Notes Receivable

Credit Interest Revenue

• What does this journal entry mean?

Debit Cash

Debit Discount on Notes Payable

Credit Interest Revenue

• What does this journal entry mean?

Answer 1

i) The firm received goods and returned to the suppliers, also the goods were already paid for.

ii) Money is borrowed from the bank, the accountant will debit the Cash account to reflect the increase in the amount of cash and credit the Notes Payable account to show the corresponding debt.

iii) Inventory bought on credit.

iv) An amount of accrued interest for the party who is receiving payment is a credit to the interest revenue account and a debit to the interest receivable account.

v) The notes payable will now be recorded at the discounted value and hence we will be debiting the notes payable account with the balance and crediting cash as we are now making payment against the balance in the notes payable and closing it off.

vi) No adjusting entries have been made to accrue interest revenue, the honored note is recorded by debiting cash for the amount the customer pays.

vii) An increase in the amount of notes payable from a new issuance is recorded, hence cash is debited.