Goods Damage

Here is how to adjust in the books of accounts based on your query:

1. Entry correctness: You entry "Damage goods Dr.Under expenses" and "Purchase a/c Cr." seems to be aiming to record the loss. Amore appropriate way might be to debit "Loss due to flood" (under expenses) and credit "Purchase" or "Inventory" for the value of goods damaged.
2. Reducing item-wise stock: You should reduce the stock value by the amount of damaged goods in your inventory records.
3. Allowance in Profit and Loss account: Yes, damage due to flood is typically allowed as an expense in the Profit and Loss account.
4. ITC reversal: If you have claimed Input Tax Credit (ITC) on those damaged goods, you might need to reverse it as per GST rules for goods lost or damaged due to unforeseen events like floods. 
5. Transfer to capital account: Generally, you do not transfer damage value to a capital account as it is an expense related to business operations. 

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