Question

Select the most appropriate alternative from the alternatives given below and rewrite the statement.

Goods or Amount taken by proprietor for his personal use should be debited to ______.
a) Sales A/c
b) Drawing A/c
c) Purchases A/c
d) Cash A/c

Answer 1

Goods or Amount taken by proprietor for his personal use should be debited to Drawings A/c.

Explanation:
Drawings represent the amount withdrawn by the proprietor from his/her business. It can be either in cash or kind (goods withdrawn for personal use). Such withdrawals reduce the amount of capital and are debited to a separate account known as Drawings Account.

Rationale behind why drawings are not debited to Purchases A/c, Sales A/c or Cash A/c?
Purchases A/c is debited when some goods are purchased for resale.
Sales A/c is credited when goods are sold for cash or on credit.
Finally, Cash A/c is debited when cash sales are made.

Hence, Drawings A/c is debited when the proprietor withdraws goods or cash from the business for his/her personal use.