Question

Pass journal entry:-
1. proprietor withdraw for his personal use cash rs. 20,000 and goods worth rs. 10,000. 2. goods rs.50,000 were given as charity (costing rs.60,000).
3. goods rs. 25000 given as free sample distribution.
4. goods rs. 50,000 and cash rs. 30,000 were stolen by employee.
5. goods worth rs. 1,00,000 destroy by fire. insurance co. admitted and paid claim for 60% amount.

Answer 1

When goods are withdrawn by the proprietor, goods are going out of the business i.e., purchases account has to credited. The journal entry for this is -

Drawings A/c          Dr 10000

      To Purchases A/c              10000

Instead of this entry, the incorrect entry passed was -

 Drawings A/c         Dr 10000

        To Sales A/c                    10000

Here, instead of purchase account sales account has been credited whereas drawings account has been rightly debited , so to cancel this entry and rectify it, sales account which was credited is to be debited to cancel the entry, and purchases account will be credited fro the original entry. Since drawings account is rightly debited, no change will be made regarding drawings account.  The rectified journal entry thus becomes -

 Sales A/c          Dr 10000

        To Purchases A/c      10000

Answer 2

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