Originally posted by : Prachi Srivastava
I was not able to understand what reasoning from Golden Rules was used to reach this Journal entry.
- Employees had taken stock worth 10,000(Cost price-7500) and the same was deducted from their salary in the subsequent month.
Salaries A/C 7,500
To Purchase A/C 7,500
1.Explanation for Debit and Credit using Golden Rules
2.Why 7,500 is being debited and Credited,why not 10,000.
3 Golden rules are here under:-
(A) "Debit the receiver, credit the giver"
(B) "Debit what comes in, credit what goes out"
(C) "Debit all loses and expenses, credit all gains and incomes"
According to rule "C" part 1st - Debit the salary A/c
According to rule "B" part 2nd - credit the purchase A/c
7500 is being debited and credited because its not sales. its like drwaings of stock by owner and payment as salary. Employees are not purchasing from Business but receiving salary from business hence profit does not arise here.
"- Employees had taken stock worth 10,000(Cost price-7500)"
You mentioned wrong information above. how you calculated stock at Rs.10000 when cost price is Rs. 7500 ( stock valued at lower of cost or selling price ) So stock is worth Rs. 7500 and not of Rs. 10000.
Hope you are satisfied