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Goods costing Rs 18,000 were sold on credit to Anil for Rs 25,000. Which entry correctly reflects the rules of debit and credit?

Debit Anil Rs 25,000 and credit Sales Rs 25,000. Anil becomes a debtor, which is an asset that increases by debit, and sales is income, which increases by credit. The entry is recorded at the selling price, not the cost of Rs 18,000.

  1. ADebit Sales Rs 25,000; credit Anil Rs 25,000
  2. BDebit Anil Rs 25,000; credit Sales Rs 25,000Correct
  3. CDebit Anil Rs 18,000; credit Sales Rs 18,000
  4. DDebit Anil Rs 25,000; credit Stock Rs 18,000

Explanation

Anil is a personal account and a debtor (asset), so it is debited when it increases. Sales is an income, so it is credited. The amount is the selling price of Rs 25,000, not the cost. Option 1 reverses the entry.

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