Purchase of goods for cash in the books of Rajeev Ranjan

Introduction
In this transaction, Rajeev Ranjan has purchased goods for cash amounting to Rs. 60,000. Let's analyze this transaction and understand its impact on the books of Rajeev Ranjan.

Explanation

1. Nature of the transaction:
The purchase of goods for cash is a common business transaction where a business entity acquires inventory or goods from a supplier in exchange for immediate payment in cash.

2. Accounting treatment:
When goods are purchased for cash, it affects two aspects of the business's financial records - the inventory or stock account and the cash account.

3. Impact on the inventory or stock account:
The inventory or stock account represents the value of goods held by the business for sale. The purchase of goods increases the inventory value, reflecting an increase in the assets of the business. In this case, the inventory account will be debited with Rs. 60,000 to record the increase in the inventory value.

4. Impact on the cash account:
The cash account represents the amount of cash available with the business. The purchase of goods for cash decreases the cash balance. In this case, the cash account will be credited with Rs. 60,000 to reflect the decrease in the cash balance.

5. Double-entry principle:
The purchase of goods for cash follows the double-entry bookkeeping principle, which states that every transaction has equal debits and credits. Therefore, the debiting of the inventory account and the crediting of the cash account ensure that the accounting equation (Assets = Liabilities + Equity) remains balanced.

6. Recording the transaction:
To record the purchase of goods for cash in the books of Rajeev Ranjan, the following journal entry will be made:

Inventory/Stock A/C - Debit - Rs. 60,000
To Cash A/C - Credit - Rs. 60,000

This journal entry increases the inventory value by debiting the inventory account and decreases the cash balance by crediting the cash account.

Conclusion
The purchase of goods for cash in the books of Rajeev Ranjan involves debiting the inventory account to reflect the increase in inventory value and crediting the cash account to record the decrease in the cash balance. This transaction follows the double-entry bookkeeping principle to ensure the accounting equation remains balanced.