A BASIC TEST ON YOUR DOUBLE ENTRY: PART 3

Scenario:

SAZZ Ltd has just bought a vehicle for £50,000 for company use and will pay for it next month. What will be the double entry posting for this?

Double entry posting:

DR: Vehicle account                       £50,000

CR: PLCA                                       £50,000

Reason:

The vehicle account has been debited because vehicles are increasing and if an asset is increasing, we debit the relevant asset account and we have credited Purchases ledger control account (PLCA) because the company hasn’t paid for the vehicle and the full amount is currently outstanding and this is a liability. Hence the liability is increasing, and if a liability is increasing, we credit the relevant liability account.

REMEMBER:

DEAD/CLIC

N/B:

PLCA is also called Creditors Control Account/ Trade Payables Account

Yours Sincerely,
The Friendly Team

The Training Place of Excellence Limited