For the returns day book, what is debited and what is credited in a double-entry posting?

For the returns day book, what is debited and what is credited in a double-entry posting?

• A. Debit the payables ledger control account (the gross total); Credit the VAT control account (the VAT total); Credit the purchase returns account (the net total)
• B. Debit the VAT control account; Credit the payables ledger control account; Debit the purchase returns account
• C. Debit the purchase returns account; Credit the payables ledger control account
• D. Debit the payables ledger control account (the net total); Credit the purchase returns account (the gross total)

Answer: (A)

When goods are returned to a supplier, you must reduce the amount you owe and reverse the VAT you previously accounted for. The posting is a three-way adjustment: Debit the payables ledger control account for the gross amount (net plus VAT) to lower the liability; Credit the VAT control account for the VAT portion to reduce the input VAT; and Credit the purchase returns account for the net value of the goods returned, as returns reduce purchases. This keeps the books balanced because the gross total debited equals the sum of the VAT and the net return credited.

When goods are returned to a supplier, you must reduce the amount you owe and reverse the VAT you previously accounted for. The posting is a three-way adjustment: Debit the payables ledger control account for the gross amount (net plus VAT) to lower the liability; Credit the VAT control account for the VAT portion to reduce the input VAT; and Credit the purchase returns account for the net value of the goods returned, as returns reduce purchases. This keeps the books balanced because the gross total debited equals the sum of the VAT and the net return credited.