Credit Balance in Purchases Ledger

Steps:

• Purchases ledger tracks suppliers (creditors) and amounts owed by the business.
• Credit balances in this ledger represent liabilities, meaning the business owes money to the supplier.
• Yasmin's account shows a $100 credit balance on 1 April 2024, post-financial year-end.
• This indicates Shula owes Yasmin $100 for purchases.

Why C is correct:

• In double-entry bookkeeping, credit balances in the purchases ledger denote outstanding payables to suppliers, so Shula owes Yasmin $100.

Why the others are wrong:

• A: Paying Yasmin debits her account, reducing or eliminating the credit balance.
• B: Yasmin paying Shula creates a debit balance, indicating an advance or overpayment.
• D: Yasmin owing Shula appears as a debit balance in the purchases ledger.

Final answer: C