Question

Furniture costing rs 500 used for office furnishing
Furniture a/c dr
To purchase a/c
Can you explain why purchase account is credited hear

Answer 1

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Entry :-

Furniture A/c______________Dr.

_________To Purchases________

This has happened because the furniture are made out of the goods of which firm is dealing with. Therefore, Furniture comes in and Goods goes out.

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Answer 2

The purchase account is credited as the asset is for office use.

• According to accounting principles, a purchase is a cost, and any reduction in an expense will result in a credit. All expenditure reductions are credited.
• The following circumstances result in credits to the purchasing account:

1. if commodities are sampled for free
2. if commodities are lost or stolen.
3. if things are given to a worthwhile cause
4. if the owner transfers the goods for personal use

• Sales are what are typically referred to as transactions when items leave a firm.
• However, because there aren't any sales taking place in any of the circumstances mentioned, purchases are lowered by crediting the purchases account.
• In the given case it is mentioned that the furniture is being used for official purposes.
• Thus, the Purchase A/c is credited.

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