Question

Goods costing Rs.10,000 taken by the proprietor for personal use were credited to sales account while passing rectifying entry :

• A. Drawing Account to be debited and Purchases Account to be credited.
• B. Sale Account to be debited and Drawing Account to be credited.
• C. Sales Account to be debited and Purchases Account to be credited.
• D. Sales Account to be debited and Suspense Account to be credited.

Answer 1

The correct option is C Sales Account to be debited and Purchases Account to be credited.

When goods are withdrawn by the proprietor, goods are going out of the business i.e., purchases account has to credited. The journal entry for this is -

Drawings A/c Dr 10000

To Purchases A/c 10000

Instead of this entry, the incorrect entry passed was -

Drawings A/c Dr 10000

To Sales A/c 10000

Here, instead of purchase account sales account has been credited whereas drawings account has been rightly debited , so to cancel this entry and rectify it, sales account which was credited is to be debited to cancel the entry, and purchases account will be credited fro the original entry. Since drawings account is rightly debited, no change will be made regarding drawings account. The rectified journal entry thus becomes -

Sales A/c Dr 10000

To Purchases A/c 10000