Purchase - a real or nominal account

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Raj Prakash (Querist)

19 May 2015 DEAR EXPERT,

AS PER GOLDEN RULES OF ACCOUNTING, WHETHER PURCHASE (TRADING ACTIVITY) IS REAL OR NOMINAL ACCOUNT?

CA Chandra Kishore Bajpai

CA Chandra Kishore Bajpai (Expert)

19 May 2015 It is Nominal Account

Raj Prakash

Raj Prakash (Querist)

19 May 2015 Thanks Bajpai Sir,

I have a doubt
As per "Real A/c."
"Debit What comes in"

Here goods (stock) comes into the business, then why it is nominal account sir,

CA Chandra Kishore Bajpai

CA Chandra Kishore Bajpai (Expert)

19 May 2015 purchase are expenses which incurred to earn revenue thus debited to P&l A/c while stock in hand is an asset and is nominal accout

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Raj Prakash

Raj Prakash (Querist)

19 May 2015 Dear Bajpai Sir,

All assets are "Real account", then how stock becomes "nominal account" sir?

kindly please clarify me in this regard.

Thank you.

CA. Sunil Gokhale

CA. Sunil Gokhale (Expert)

27 May 2015 Purchased goods are initially treated as cost of goods which will be sold during the year. It is only at the end of the year we make an adjustment for the goods which remain unsold, i.e. closing stock. Hence purchase is nominal account.

If we purchase huge quantity of stationery we will first debit it to stationery account as an expense. If some stock is remaining at the end of the year we can adjust it to 'Stock of stationery' or 'prepaid' account at the end of the year.

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