purchased goods for cash rs. 100000
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ANSWER :
❒ Given the transaction is :-
- Purchased goods for cash Rs.100000
❒ Journal Entry :-
___________________________________________________________
EXPLANATION :
❖ The three steps involved in the process of journalising the given transaction are :-
- Step 1. Identification of accounts : In this transaction, goods purchased for cash Rs. 100000. Hence, the two accounts involved in this transaction are : Purchase A/C and Cash A/C.
- Step 2. Classification of accounts : According to the Modern Approach of classification, Purchase A/C is an Expense Account and Cash A/C is an Asset Account.
- Step 3. Application of Debit and Credit rule : When goods purchased for cash, the value of Expense increases. Therefore, the Purchase A/C will be debited (as per the rule being increase in Expsense :Debited). Again, when goods are purchased for cash, asset in the form of cash decreases and hence Cash A/C will be credited (as per the rule being Asset decrease: Credited).
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