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Adujstment entry of goods witdrawn by proprietor for his personal use.

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In a business 'Goods' means articles kept for the purpose of resale.  Goods taken away by the proprietor for his personal use shall be treated as his drawings.  Applying the Golden Rule of Debit/Credit for Personal Accounts: Debit the Receiver Credit the Giver, Proprietor's A/c ( Drawings A/c) will be debited. Now we have to decide the price to be charged from proprietor, purchase price or selling price.  We should debit the Drawings A/c with the purchase price because one cannot make profit from oneself. The second aspect of this transaction is which account should be credited.  Purchase A/c is an expense A/c, a Nominal Account.  Rule for Nominal Accounts is Debit all Expenses or Losses and Credit all Income Gains or Profit.  In this transaction expenses (Purchase A/c) are reducing, hence Purchase A/c will be credit.  So the journal entry will be:

 

Drawings A/c            Dr.   800

   To Purchase A/c                       800

(Being withdrawal of goods worth Rs.800 by the Proprietor)

 

answered Oct 6, 2016 by jbsclasses (3,969 points)
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