GCEFinancial AccountingControl Accounts2024

A contra entry in control accounts arises when:

AA debtor pays his account by cheque
BA customer who is also a supplier has his debtor and creditor balances set off against each otherCORRECT
CA creditor allows a cash discount on early payment
DA debtor's account is transferred to a bad debt account
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Why the answer is B, and why the others tempt you.
A contra entry (or set-off) occurs when the same entity appears in both the sales ledger as a debtor and the purchases ledger as a creditor. The two balances are offset against each other, resulting in a debit to the Purchases Ledger Control Account and a credit to the Sales Ledger Control Account. This is different from cash payments, discounts, or bad debts, which are separate accounting entries.
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