Question

Goods returned to nihar of list price ₹ 5000 not being as per specification

Answer 1

Answer:

Nihar's A/C - Dr 5000

  To Purch. Return A/c 5000

Explanation:

Purchases are an expense for the business and increase in purchases is debited. Puchase return is the opposite of purchases, which means  reduction in purchases. Decrease in purchases, or purchase return is credited because purchases come under expense account and decrease in expenses is credited. So, Purchase return account is credited by Rs. 5,000.

When goods of amt. X were purchased from Nihar, his account was cedited and purchases account was debited, because purchases are expenses and increase in creditor/liability is credited.

Now, when the goods are returned, Nihar's account will be debited because the business is no longer obliged to pay Rs. 5,000 to Nihar because defective goods of that amount were returned.

This means that liability.creditor is decreasing, which means the creditor's account is to be debited accourding to the rules of accounting.