When is purchases account credited?

Purchases Account will be credited in the following cases. If goods are given as free sample. If goods are stolen. If goods are lost. If goods are given away as charity. If goods are withdrawn by the proprietor for personal use. Normally when goods are going out from the business are termed as sales. But … Read more

General journal

Journal or General Journal General Journal is the first phase of accounting where all the transactions are recorded originally in chronological order. That’s why it is also called the original book of entries or chronological book or day book. In the journal both the aspects of all the transactions are recorded by following the “Double … Read more

Journal entry for purchase of merchandise

What are merchandise? Merchandise are the goods purchased for the purpose of resale in the ordinary course of business. This term is frequently used in trading organizations. Journal entry Merchandise are purchased either for cash or on account. The journal entries required to record the purchase of merchandise under both the cases are discussed below: … Read more

Journal entry for sale of merchandise

Businesses sell merchandise for cash as well as on account. The journal entries for both type of transactions are discussed below: When merchandise are sold for cash: When merchandise are sold for cash, the accounts involved in the transaction are cash account and sales account. Cash account is debited and sales account is credited. See … Read more

Journal entry for cash discount

What is cash discount? Cash discount is offered by sellers to buyers for making the payment within a stated number of days. The purpose of cash discount is to encourage buyers of merchandise to make payment before the due date. The percentage of cash discount is mentioned in payment terms. For example, the terms 2/10, n/30 means … Read more

Journal entry for purchases return (returns outwards)

What is Return Outwards? – Definition Merchandise being returned to suppliers are also termed as “returns outwards“. If merchandise purchased are not according to specification or they are defective, buyer may return them to the seller or ask him for an allowance (reduction in price). To record such returns and allowances, an account is known … Read more

Journal entry for goods given as charity

A business organization may give some goods as charity to a charitable institution or directly to people in need of charity. Goods given away as charity reduce the merchandise without any consideration and is recorded as expense in the books of the business. Journal entry When goods are given as charity, charity account is debited and … Read more

Journal entry for distribution of goods as free samples

The distribution of goods as free samples is not uncommon among businesses. It is a part of overall marketing efforts of a business. The major purposes of such distribution include: introducing a new product in the market. introducing an existing product in a new market. introducing a feature upgrade in an existing product. Increasing the market share … Read more

Journal entry for sales return (returns inwards)

Definition of Return Inwards Occasionally, the merchandise sold to customers are returned by them due to one or more reasons. In accounting, such returned merchandise are termed as sales returns or returns inwards. The major reasons of sales returns are: defective merchandise have been shipped to customers. excessive quantity of merchandise has been shipped to … Read more

Compound journal entry

What is Compound Journal Entry?- Definition A compound journal entry is a journal entry that involves more than two accounts. When two or more transactions of the same nature take place on the same date, accountants prefer to make a compound journal entry instead of two or more separate journal entries. There must be two … Read more