The owner of a sole trader business takes goods costing £600 for personal use. What is the double entry?
Answer and explanation
Correct answer: B. Debit drawings £600, credit purchases (or inventory) £600
- Step 1: Goods taken by the owner are drawings, which reduce the owner's capital.
- Step 2: The cost of the goods leaves the business, so purchases (or inventory) is credited.
- Step 3: Drawings are debited, because drawings are the opposite of capital.
Answer
Debit drawings £600, credit purchases (or inventory) £600.
Why not the others: This reverses the entry and would increase the business's costs while reducing drawings. Debit drawings £600, credit sales £600: The goods are taken at cost, not sold, so no sale is recorded. Debit capital £600, credit cash £600: No cash has moved; goods have, so cash must not be credited.
Practise more Trial balance, errors and suspense accounts.
Free questions with an explanation for every one, and full timed ACCA Applied Knowledge (BT, MA, FA) mock tests.
More Trial balance, errors and suspense accounts questions
- The purchase of office equipment for £2,400 was debited to the purchases account. Which type of error is this?
- A sales invoice for £750 was posted to the sales account as £570, and a purchase invoice of £180 was posted to purchases as £360, in a way t…
- A trial balance fails to agree. The total of debit balances is £412,350 and the total of credit balances is £410,950. What entry would be ma…
- A trial balance was out of balance and a suspense account with a debit balance of £250 was opened. The error was later found: a discount rec…
- A business's draft profit for the year is £54,000. Before finalising, three errors are found: depreciation of £2,000 was omitted; closing in…
- In a sales ledger a customer's balance of £4,570 was transposed to £4,750 when copied into the list of balances used for the control account…