What is the Nature of Account & why

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Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2011 When we purchase goods, it means goods is coming in our business therefore Debit and cash is going out therefor Credit
considering the Golden Rule
Then how we can say Purchase is Nominal A/c not a Real A/c..........
Explain it............

Thanks

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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11 January 2011 There is a controversy on this issue , some foreign Authors and the Great R L Gupta of Sri Ram College of commerce considers the Purchase account as real account and cost of goods sold as nominal account, but if you see ICAI material they considers the purchase as Nominal accounts. Actually Purchases is a real account which represent stock but since it represent only inflow of stock and to consider it as assets we have to adjust sale opening stock and the resultant figure will be closing stock an assets, so it is considered as Real account .. SO better consider purchase always a nominal account and if any one argue with you be ready with the actual understanding

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Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2011 So you means there is no specific solution of this matter just for our adjustment or confortability we will consider this as Nominal a/c.
but if we think nicely then we can say that, to prove this as real a/c, we have the backup (since it represents the stock and stock is our Asset and it is coming in our business)
But when we say it is Nominal a/c what is the backup there................except one thing that we will be using Trading A/c to close this a/c that is why it is Nominal (as all the Nominal a/c is closed by Either Trading or Profit & Loss A/c)........
Rest I am leaving on you......EXPERT JI

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Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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11 January 2011 Purchase is just the expense, it represent inflow of stick not the stock, stock comes only after adjustment of purchase with sales and opening stock, so better it is a nominal accounts

Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2011 With Respect you are saying it is better to consider it(Purchase A/c) as Nominal a/c as it is the expenses, Why you do not think that it is better to understand to consider it(purchase a/c) as Real a/c because this is the expense for purchasing one asset.....

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
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11 January 2011 purchase only means inflow of stock not closing stock thats why

Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2011 when we return the goods purchased, we generally record in Purchase Return A/c and we close this account (P/R A/c) with Purchase a/c then how you can say that purchase A/c means only inflow of stock........