CMA Foundation · Fundamentals of Financial and Cost Accounting · Journal and Ledger
Goods costing Rs 8,000 are withdrawn by the proprietor for personal use. Which entry is correct?
Debit Drawings Account and credit Purchases Account for Rs 8,000. Drawings reduce the proprietor's claim and are debited. Goods leaving the business are taken out of purchases at cost by a credit. No sale takes place, so Sales is not credited.
- ADrawings Account Dr. 8,000 to Purchases Account 8,000Correct
- BPurchases Account Dr. 8,000 to Drawings Account 8,000
- CCapital Account Dr. 8,000 to Cash Account 8,000
- DDrawings Account Dr. 8,000 to Sales Account 8,000
Explanation
Drawings reduce the owner's capital and are debited. Goods leaving the business reduce purchases, so Purchases Account is credited, at cost. Crediting Sales would wrongly record revenue.
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