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Value of goods drawn by proprietor should be credited to:
- a)Capital Account
- b)Sales Account
- c)Drawings Account
- d)Purchases Account
Correct answer is option 'D'. Can you explain this answer?
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Value of goods drawn by proprietor should be credited to:a)Capital Acc...
Value of Goods Drawn by Proprietor and its Accounting Treatment
Introduction:
In a sole proprietorship, the proprietor can draw goods from the business for personal use. The value of goods drawn by the proprietor is required to be recorded in the books of accounts.
Accounting Treatment:
The accounting treatment for the value of goods drawn by the proprietor depends on the nature of the goods.
For example, if the goods drawn are for personal use, then it is treated as a withdrawal of goods from the business and the value of such goods should be credited to the purchases account.
Explanation:
The reason for crediting the purchases account is that the value of goods drawn is treated as if the proprietor has purchased those goods from the business. Hence, it is recorded in the purchases account.
If the proprietor had not drawn the goods, then the goods would have been sold to customers, and the value of such goods would have been recorded in the sales account. However, since the proprietor has drawn the goods for personal use, it is not sold to customers, and hence, it is not recorded in the sales account.
Conclusion:
Thus, the value of goods drawn by the proprietor is credited to the purchases account, and it is treated as a withdrawal of goods from the business. This helps in determining the true profit of the business and helps in maintaining accurate records.
Introduction:
In a sole proprietorship, the proprietor can draw goods from the business for personal use. The value of goods drawn by the proprietor is required to be recorded in the books of accounts.
Accounting Treatment:
The accounting treatment for the value of goods drawn by the proprietor depends on the nature of the goods.
For example, if the goods drawn are for personal use, then it is treated as a withdrawal of goods from the business and the value of such goods should be credited to the purchases account.
Explanation:
The reason for crediting the purchases account is that the value of goods drawn is treated as if the proprietor has purchased those goods from the business. Hence, it is recorded in the purchases account.
If the proprietor had not drawn the goods, then the goods would have been sold to customers, and the value of such goods would have been recorded in the sales account. However, since the proprietor has drawn the goods for personal use, it is not sold to customers, and hence, it is not recorded in the sales account.
Conclusion:
Thus, the value of goods drawn by the proprietor is credited to the purchases account, and it is treated as a withdrawal of goods from the business. This helps in determining the true profit of the business and helps in maintaining accurate records.
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Community Answer
Value of goods drawn by proprietor should be credited to:a)Capital Acc...
The goods taken by the proprietor for personal use, reduces the inventory of the business. Hence,it is placed on a temporary drawings account. It reduces the Owner's equity account.
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Value of goods drawn by proprietor should be credited to:a)Capital Accountb)Sales Accountc)Drawings Accountd)Purchases AccountCorrect answer is option 'D'. Can you explain this answer?
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Value of goods drawn by proprietor should be credited to:a)Capital Accountb)Sales Accountc)Drawings Accountd)Purchases AccountCorrect answer is option 'D'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Value of goods drawn by proprietor should be credited to:a)Capital Accountb)Sales Accountc)Drawings Accountd)Purchases AccountCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Value of goods drawn by proprietor should be credited to:a)Capital Accountb)Sales Accountc)Drawings Accountd)Purchases AccountCorrect answer is option 'D'. Can you explain this answer?.
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