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CSEET · Fundamentals of Accounting · Preparation of Final Accounts for Sole Proprietorship

A trader takes goods costing Rs 8,000 from the business for personal use. How should this be treated while preparing the Trading Account?

Goods taken by the proprietor for personal use are deducted from purchases in the Trading Account, with the amount charged to Drawings at cost. They are neither sales nor business expenses, so they must not be shown in the Profit and Loss Account.

  1. AAdded to sales
  2. BDeducted from purchasesCorrect
  3. CDebited to the Profit and Loss Account
  4. DShown as an addition to closing stock

Explanation

Goods withdrawn by the proprietor reduce the purchases because they were not available for sale. The corresponding entry is debit to Drawings and credit to Purchases. It is not a sale and not an expense of the business.

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