Creditors’ Allowances Journal

The purpose of the creditors’ allowances journal is to record transactions related to goods send back to creditors due to being not according to specifications, damaged or correction of errors on invoices that will result in reduced debt to creditors.  Before any of these scenarios occurred, money was owed to creditors which is thus a liability. After returns are made to creditors less money is owed to them. As liabilities decrease on the debit side, creditors control has to be debited. As items other than trading stock comes into the equation the collective name of sundry returns is used as contra entry.  The posting occurs at month end as a column total is posted to creditors control. By applying the double entry principle all the other accounts will have to be credited with creditors control as the contra entry. Column totals to be posted at month end and sundry accounts on transaction date.

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Please note there is not an account called creditors’ allowances.

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