Hi,
In the journal entries -
Drawings A/c Dr. To Purchases A/c
Charity A/c Dr. To Purchases A/c
can somebody tell what is the exact reason for crediting purchases a/c in all such transactions?
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Replies (2)
This is the case when u take some items from stock as drawings or distribute as charity.
So you have to deduct from your stock. So you credit your purchases because stock a/c is not opened in books. It appears in balance sheet date only.
The stock of material whihc is being used for personal purpose of the proprietor/partner, is not considered as an business expense, as it is not incurred for the purpose of the business. hence it is deducted from the value of purchases and purchase account is credited.
When the proprietor/partner makes some charity from his stock, then it is not considered to be used for the purpose of business & hence agains purchase account is being credited.
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