Setting off a customer who is also a supplier
When one business both owes you money and is owed money by you, a contra entry sets one balance against the other.
Task 1Two balances with one business3 questions
Moorside Tool Hire hires tools to Rowan Joinery, so it is a supplier. Rowan Joinery also built a shop counter for Moorside, so it is a customer too.
| Ledger | Balance |
|---|---|
| Purchases ledger: Rowan Joinery owes Moorside | 870.00 |
| Sales ledger: Moorside owes Rowan Joinery | 1,200.00 |
The two businesses can agree to set one balance off against the other, so that only the difference is paid. This is a contra entry, also called a set-off.
The amount set off is the smaller of the two balances.
Task 2The contra entry4 questions
Task 3The control accounts after the contra2 questions