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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Journal entry
Replies (3)
It means the stock is directly used for charity or for consumption.
when purchases are credited in either of the entries,,it is assumed that it was debited first. ie purchases a/c -dr,To cash/creditors..this means the purchases are made for business purpose which is seperate from the proprietor etc. Later when the proprietor takes goods from the purchases made earlier,it being for his personal use and having no relation with the business , will be treated as drawings.
the reason that the purchases is credited is:There is no other suitable head to credit,so its better that the stocks which is withdrawn doesnt become the part of stock at all,hence reduce directly from purchases by crediting it!
ya i agreed with mahak katyal.
enough reason nd good
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