Question

Jamal treats purchases of loose tools as capital expenditure.
On 1 July 2014 his loose tools were valued at Rs.7100.
On 1 September 2014 he bought new tools costing Rs. 1200.
On 30 June 2015 he valued loose tools at Rs.6000.
Which amount for loose tools appeared in his income statement for the year
ended 30 June 2015?​

Answer 1

In The Books of (--- Ltd)                  

                                     Journal Entry                          

Date         Particular                                       Debit    Credit  

             Loose tool's            a/c     Dr           3,000

             To Cash                   a/c                                   3,000

             (Being loose tool's purchased by cash)

According  to Accounting rules what comes to business would be debit and what goes from the business should be credit  . In this case, cash goes from business and tools come in.

Loose tool' is a type of current assets, that is used for fitting of the machine and other tools .

Loose tool's is assets and all assets should be debit.