ACCA Applied Knowledge · Financial Accounting · Incomplete records
Tamsin, a sole trader, takes goods from her shop for personal use. Which double entry correctly records goods taken at cost of $400?
Debit Drawings and credit Purchases for $400. The owner has withdrawn goods at cost, which increases drawings and reduces the cost of goods purchased available for sale. Crediting sales would wrongly treat the withdrawal as revenue.
- ADebit Drawings $400, Credit Purchases $400Correct
- BDebit Purchases $400, Credit Drawings $400
- CDebit Drawings $400, Credit Sales $400
- DDebit Inventory $400, Credit Drawings $400
Explanation
Goods taken by the owner reduce purchases (or inventory) at cost and increase drawings. So debit Drawings and credit Purchases. Option B reverses the entries. Option C records the goods at sales value as revenue, which is wrong because no sale occurred.
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