CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger
Goods costing Rs 12,000 were withdrawn by the proprietor from the business for personal use. Which journal entry is correct?
Debit Drawings account and credit Purchases account for Rs 12,000. Goods taken by the owner reduce owner's equity, so drawings is debited, while the purchases account is credited at cost because the goods leave the business without being sold.
- ADrawings A/c Dr 12,000 to Purchases A/c 12,000Correct
- BCapital A/c Dr 12,000 to Cash A/c 12,000
- CPurchases A/c Dr 12,000 to Drawings A/c 12,000
- DDrawings A/c Dr 12,000 to Sales A/c 12,000
Explanation
Drawings is a reduction of owner's equity, so it is debited. Goods taken out reduce purchases, so Purchases is credited at cost. Option D wrongly records it at sales value, and option C reverses the entry.
Did you get it right without looking?
One question tells you little. A timed set on Journal and Ledger shows your real accuracy, how long you take and where you lose marks.
More Journal and Ledger questions
- Which of the following accounts is credited when the proprietor brings additional cash into the business, and what is its nature under the m…
- Mehta Stores' Sharma Ac shows: opening balance Rs 12,000 (Dr); goods sold on credit Rs 30,000; cash received Rs 25,000; goods returned by Sh…
- Under the accounting equation, a business pays Rs 20,000 to a creditor in cash. What is the effect of this transaction?
- A firm records these transactions: (i) purchased machinery for Rs 60,000, paying Rs 25,000 in cash and the balance on credit; (ii) paid Rs 5…
- A trader sold goods on credit to Anil for Rs 30,000 on 5 March, and goods costing Rs 8,000 for his own use were taken from stock on 6 March.…
- Under the modern approach of the accounting equation (Assets = Liabilities + Capital), which of the following increases the capital of the o…