Question

If one of the cars purchased by a car dealer is used for business purpose, instead of resale, then it should be recorded by_____
a) Dr Drawing A/c & Cr Purchases A/c b) Dr Office Expenses A/c & Cr Motor Car A/c
c) Dr Motor Car A/c & Cr Purchases A/c d) Dr Motor Car & Cr Sales A/c

Answer 1

Answer:

Option C

Explanation:

as the car is being used for business, it is to be treated as a fixed asset.

Answer 2

We need to pass the correct journal entry for one of the cars purchased by a car dealer which is being used for business purposes

• In the question the person, we are talking about is a car dealer
• He is using the car which actually he should have sold for business purposes
• As he is not selling the car and neither purchasing the car both sales and purchases accounts cannot be debited or credited
• So the only option and correct option left is b. Dr.Office Expenses A/c
• Cr. Motor Car A/c
• The explanation for the transaction is given as under
• As the person is using the car for business purposes it is an office expense so the office expense account is debited
• As he is using the car the car cannot be sold so we need to credit the account of the motor car