All 25 Sales & Purchase Ledgers questions
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What is a credit customer versus a cash customer? What is a purchase invoice checked against before posting? How is a customer's account in the sales ledger written up? How is a supplier's account in the purchases ledger written up? How do you deal with a credit balance in the sales ledger? What is an aged receivables (debtors) analysis and why is it used? How is a refund to a customer or from a supplier recorded? How is an early-settlement discount received from a supplier recorded? How do you record goods taken by the owner from inventory (drawings in kind)? What is the difference between the memorandum ledger balance and the control account balance?
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Bookkeeping › Sales & Purchase Ledgers

What is a contra between the sales and purchases ledgers (set-off)?

Intermediate

Answer

A contra/set-off occurs when the same party is both a customer and a supplier. The amount owed can be offset: debit the purchases ledger account and credit the sales ledger account for the lower balance, so only the net is settled. A corresponding entry adjusts both control accounts.
Party owes us 500 (sales ledger) and we owe them 300 (purchases ledger):
  Dr Purchases Ledger (their supplier a/c) 300
      Cr Sales Ledger (their customer a/c) 300
  Net: they owe us 200.
Real-world example A firm both buys from and sells to the same company, so the smaller balance is set off, leaving a net amount.

Common follow-ups: When is a contra used? | How are the control accounts affected?

Control Accounts Correcting Errors Sales & Purchase Ledgers
All 25 Sales & Purchase Ledgers questions