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CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger

Anil, the proprietor of Anil Stores, took goods costing Rs 6,000 from the shop for his personal use. How should this be journalised in the books of the firm?

Debit Drawings A/c and credit Purchases A/c with Rs 6,000. The proprietor's withdrawal of goods for personal use is drawings, and goods leaving the business are credited to Purchases at cost. It is not a sale, so Sales is not credited.

  1. ADrawings A/c Dr 6,000 to Purchases A/c 6,000Correct
  2. BPurchases A/c Dr 6,000 to Drawings A/c 6,000
  3. CCapital A/c Dr 6,000 to Sales A/c 6,000
  4. DDrawings A/c Dr 6,000 to Sales A/c 6,000

Explanation

Goods taken by the owner are drawings, so Drawings A/c is debited. The stock of goods reduces, so Purchases A/c is credited at cost of Rs 6,000. Option B reverses the effect. Options C and D credit Sales, which would wrongly record the goods at selling price as revenue.

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