CMA Foundation · Fundamentals of Financial and Cost Accounting · Accounting Cycle
The proprietor, Ravi Iyer, withdrew goods costing Rs 8,000 from the business for personal use. The correct journal entry is:
Debit Drawings A/c Rs 8,000 and credit Purchases A/c Rs 8,000. The proprietor receives the goods, so Drawings is debited, and the goods leave the business at cost, so Purchases is credited rather than Sales.
- ADrawings A/c Dr 8,000 to Purchases A/c 8,000Correct
- BPurchases A/c Dr 8,000 to Drawings A/c 8,000
- CCapital A/c Dr 8,000 to Sales A/c 8,000
- DDrawings A/c Dr 8,000 to Sales A/c 8,000
Explanation
Drawings is a personal account of the proprietor, who is the receiver of the goods, so it is debited. Goods going out reduce Purchases, so Purchases is credited at cost. Recording at Sales at selling price is wrong, as goods are valued at cost for drawings.
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