Question

Mr Office Furniture is in business of selling office furniture to the general public. Mr Office operates a perpetual inventory system.

On 8^th April, Mr Office received a cheque for $6,160 from B. Freeman, a debtor, in payment of his outstanding account. On the 15^th of April, Mr Office receives notification from the bank that B. Freeman had insufficient funds in his account.

Which general journal entry should be used to record the cheque dishonour into the books of the business?

Select one:

a.

Debit	Accounts Receivable Control - B Freeman	6,160
Credit	Bank		6,160
	Dishonoured cheque

b.

Debit

Sales

5,544

Debit

GST Payable

616

Credit

Accounts Receivable Control - B Freeman

6,160

Dishonoured cheque

c.

Debit	Bank	6,160
Credit	Accounts receivable Control - B Freeman		6,160
	Dishonoured cheque

d.

Debit	Accounts Receivable Control	5,600
Debit	GST Payable	560
Credit	Sales		6,160
	Dishonoured cheque

Answer 1

Ans: Option ( A)

  

Debit	Accounts Receivable Control - B Freeman	6,160
Credit	Bank		6,160
	(Dishonoured cheque)

Explanation:  

Journal Entries:

Date	Account Name	Debit	Credit
1.	Account Receivable - B Freeman	$6,160
	Sales		$6,160
	(Accounting Entry when sale took place)
8,April	Bank	$6,160
	Account Receivable		$6,16£
	( Accounting Entry for when payment received)
15 April	Accounts Receivable Control - B Freeman	$6,160
	Bank		$6,160
	( Accouting Entry - dishonoured cheque)

2) We can see, it is reversing entry of first entry ( i.e. reverse of when sales were made.)

3) so, only option ( a) suggests the correct entry, so answer is option (a).

4) Rest all the other options are incorrect.