Question

(c) Which of the following is a business transaction :- (1) Cash withdrawn from personal bank A/c 12,000 for domestic use. (2) Paid electricity charges 5,000.

Answer 1

Answer:

Journal entry for the transaction of withdrawing ₹1200 from bank

Withdrawal can be for two purposes viz;

For business use

For personal use

If the withdrawal is for business use, the journal entry would be as follows :

Cash a/c……………..dr ₹1200

To Bank a/c ₹1200

Cash is real a/c and comes in business so Debited

Bank is personal a/c and giver so Credited

This journal entry is also termed as Contra entry as both cash and bank a/c are involved simultaneously.

If the withdrawal is for personal use, it is termed as Drawings.

The journal entry would be as follows :

Drawings a/c…………..dr ₹1200

To bank a/c ₹1200

Drawings a/c is reduction in capital that's why Debited

Bank is personal a/c and giver so Credited