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?
3 Replies
Manish Negi
(Expert)
(394 Points)
Replied 18 April 2012
It means the stock is directly used for charity or for consumption.
mahak katyal
(a)
(135 Points)
Replied 22 April 2012
when purchases are credited in either of the entries,,it is assumed that it was debited first. ie purchases a/c -dr,To cash/creditors..this means the purchases are made for business purpose which is seperate from the proprietor etc. Later when the proprietor takes goods from the purchases made earlier,it being for his personal use and having no relation with the business , will be treated as drawings.
the reason that the purchases is credited is:There is no other suitable head to credit,so its better that the stocks which is withdrawn doesnt become the part of stock at all,hence reduce directly from purchases by crediting it!
chandu
(student)
(1051 Points)
Replied 22 April 2012
ya i agreed with mahak katyal.
enough reason nd good
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