journal of purchase goods from Narayan trading house for Rupees 1500
Answers
ANSWER :
- ❖ The journal entry for the transaction "purchase goods from Narayan trading house for Rs. 1500" (considering it as a credit transaction) will be :-
✪ Purchase A/C Dr. Rs. 1500
To Narayan Trading House A/C Rs. 1500
[Being purchase goods from Narayan trading house on credit]
- ❖ The journal entry for the transaction "purchase goods from Narayan trading house for Rs. 1500" (considering it as a cash transaction) will be :-
✪ Purchase A/C Dr. Rs. 1500
To Cash A/C Rs. 1500
[Being purchase goods from Narayan trading house by cash]
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EXPLANATION :
Generally when it is not mentioned whether the purchase is made on credit basis or cash basis in the question, we consider it as a credit basis transaction.
Since, in the question, it is a cash transaction or credit transaction, journal entries are given considering the transaction as a credit as well as a cash transaction.
- When the transaction is a credit transaction, the two accounts are : Purchase A/C and Narayan Trading House A/C.
According to the Traditional Approach of accounting, in the given transaction, the Purchase A/C is a Nominal Account and Narayan Trading House A/C is a Personal Account.
Since purchase is an expense, following the golden rule of Nominal Account, the Purchase A/C is debited. Again, since Narayan Trading House is the creditor and giver of the goods, following the golden rule of Personal Account, Narayan Trading House A/C is credited.
- When the transaction is a cash transaction, the two accounts are : Purchase A/C and Cash A/C.
According to the Traditional Approach of accounting, in the given transaction, the Purchase A/C is a Nominal Account and Cash A/C is a Real Account.
Since purchase is an expense, following the golden rule of Nominal Account, the Purchase A/C is debited. Again, since cash goes out from the firm, following the golden rule of Real Account, Cash A/C is credited.