Question

Answer in once sentence only.

Which account is debited, when goods are destroyed by fire?

Answer 1

When goods are destroyed by fire, then ‘Loss by Fire A/c’ is debited and ‘Purchases A/c’ is credited. The goods destroyed by fire are considered to be a loss for a business entity and is classified as a nominal account. Therefore, according to the rule of nominal account, all the expenses and losses are to be debited. Hence, ‘Loss by Fire A/c’ is debited when goods are destroyed by fire.