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

Meera, a sole proprietor, took goods costing ₹8,000 from her shop for personal use during the year, and no entry has been made. In the final accounts, the correct treatment is to:

Debit Drawings and credit Purchases by ₹8,000. Goods withdrawn by the proprietor for personal use are drawings valued at cost, so purchases in the Trading Account are reduced and the capital is reduced through drawings.

  1. ADebit Drawings and credit PurchasesCorrect
  2. BDebit Purchases and credit Drawings
  3. CDebit Drawings and credit Sales
  4. DDebit Profit and Loss Account and credit Purchases

Explanation

Goods taken for personal use are drawings at cost. Drawings account is debited and Purchases credited (reducing purchases in the Trading Account). Crediting Sales would record the goods at selling price, which is incorrect, and debiting Profit and Loss would treat it as an expense.

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