Offsetting mutual obligations in accounts receivable

Steps:

• Start with sales ledger control account balance of $1420, representing total receivables.
• Identify customer's outstanding debt of $1000 within that total.
• Recognize $400 goods supplied by customer as a payable, offset against their$1000 receivable.
• Reduce total receivables by $400 net offset:$1420 - $400 =$1320.

Why B is correct:

• Offset principle in accounting reduces debtor balance by the value of reciprocal transaction, decreasing control account by $400.

Why the others are wrong:

• A: Subtracts $48 erroneously, ignoring exact offset amount.
• C: Assumes no adjustment, overlooking the offset.
• D: Adds $40 mistakenly, treating supply as a receivable increase.

Final answer: B