Hi,
In the journal entries -
Drawings A/c Dr. To Purchases A/c
Charity A/c Dr. To Purchases A/c
can somebody tell what is the exact reason for crediting purchases a/c in all such transactions?
Dear if u paid cash to someone or something,then ur cash balance will reduced,& therefore for decrease in cash the cash is to be credited
in the same manner if the owner takes caertain business goods or the goods are given at charity then goods balance has been reduced so as a rule for decrease in asset(here goods is the asset),goods/purchase is to be credited
in the first entry goods purchased are being drawn by the ownerand in second entry good purchased are given for charity thereby decreasing the goods purchased. since asset is decreasing it is credited following the rule DEBIT WHAT COMES IN CREDIT WHAT GOES OUT.
in the first entry goods purchased are being drawn by the ownerand in second entry good purchased are given for charity thereby decreasing the goods purchased. since asset is decreasing it is credited following the rule DEBIT WHAT COMES IN CREDIT WHAT GOES OUT.
CAclubindia
