If a supplier is paid by cheque for 500, what entry is made?

• A. Dr Trade Creditors 500; Cr Bank 500.
• B. Dr Bank 500; Cr Trade Creditors 500.
• C. Dr Trade Creditors 500; Cr Purchases 500.
• D. Dr Purchases 500; Cr Bank 500.

Answer: (A)

When you pay a supplier by cheque, you’re settling a liability with cash at bank. In double-entry terms, liabilities are reduced by a debit and cash is reduced by a credit. So you debit Trade Creditors for 500 to decrease what you owe, and you credit Bank for 500 to show the payment has reduced the bank balance. The result is the supplier’s balance is cleared and the bank account decreases by the same amount. Other options misstate the transaction, such as increasing the bank, moving the payment to Purchases, or debiting the wrong account.