An Office supplies company requires an advance payment of $8000 for the office supplies you wish to order. You enter and pay a prepayment type invoice for $8000. You enter the standard invoice to book the expense which totals $10000 and you apply the prepayment to the standard invoice.
What are the accounting entries for that standard invoice with the prepayment application?
A. Invoice accounting – Dr Prepayment Account 10000 Cr AP Liability Account 10000.The prepayment application has no impact on the Invoice.
B. Invoice accounting – Dr Expense Account 10000 Cr AP Liability Account 10000.Prepayment application – Dr AP Liability 8000 Cr Prepayment Account 8000.
C. Invoice Accounting – Dr Prepayment Account 10000 Cr AP Liability Account 10000.Prepayment application – Dr Expense Account 8000 Cr Prepayment Account 8000.
D. Invoice accounting – Dr Expense Account 10000 Cr AP Liability Account 10000.
Prepayment application – Dr AP Liability Account 2000 Cr Prepayment Account 2000.
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B
As per my knowledge its B
B
B
B
Correct Answer is B