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Goods worth Rs. 50 given as charity should be credited to 
  • a)
    Charity account; 
  • b)
    Sales account;
  • c)
    Purchase account
  • d)
    Cash account 
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
Goods worth Rs. 50 given as charity should be credited toa)Charity acc...
Explanation:

When goods worth Rs. 50 are given as charity, it means that the organization has donated those goods for a charitable cause. In accounting terms, this donation is treated as an expense for the organization.

The correct account to be credited in this case is the Purchase Account. Here's the explanation:

1. Purchase Account:
- The Purchase Account is a nominal account that is used to record the cost of goods purchased by the organization for the purpose of resale or for use in its operations.
- When goods are given as charity, it is considered as an expense for the organization. Hence, the cost of those goods should be credited to the Purchase Account to reflect the reduction in inventory and the corresponding expense incurred.

2. Charity Account:
- The Charity Account is a nominal account that is used to record all expenses related to charitable activities.
- While the donation of goods is indeed a charitable activity, it is not the correct account to be credited in this case. The Charity Account is usually used to record cash or other monetary donations made by the organization.

3. Sales Account:
- The Sales Account is a nominal account that is used to record the revenue generated from the sale of goods or services.
- Since the goods are being given as charity and not sold, it is not appropriate to credit the Sales Account.

4. Cash Account:
- The Cash Account is a real account that is used to record all cash transactions of the organization.
- While the organization may have paid cash to purchase the goods initially, the question does not mention any cash transaction related to the donation. Therefore, it is not appropriate to credit the Cash Account.

In conclusion, when goods worth Rs. 50 are given as charity, the correct account to be credited is the Purchase Account. This will reflect the reduction in inventory and the corresponding expense incurred by the organization.
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Goods worth Rs. 50 given as charity should be credited toa)Charity acc...
Purchase account
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Goods worth Rs. 50 given as charity should be credited toa)Charity account;b)Sales account;c)Purchase accountd)Cash accountCorrect answer is option 'C'. Can you explain this answer?
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