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Old Tuesday, May 06, 2008
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A.O.A,

Please guide me regarding adjusting entry of DRAWINGS. I asked the same QS earlier as well, but i thnk was nt able to convey properly.

Mr.Karim has taken goods for his personal use from business, but not recorded
OR
simple drawings

(Although i know its treatment in P/L, that it will be treated as EXP, and in B/S , we will subtract it from capital, bt i want to ask, while making an adjusting entry, which we call as MULTI ENTRY, )

DRAWAING WILL BE DEBIT
???????? WILL BE CREDIT??

Some1 told me that PURCHASES WILL be credited, if it is right, then what is its logic to do so.

Plz clear.
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Old Thursday, May 08, 2008
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In the closing entries drawing will be credited from Expense & revenue account. Besides, It`s treated as a separate account which is being updated by every occurence. If it is a personal drawing, It will be deducted from partner share. Incase of business drawing, It`ll be carried as expense.

Adjusting entries are to maintain further transactions. For example, If a company maintain accounts on cash or accrued basis. They will make them adjusted.

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Old Thursday, May 08, 2008
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1- Drawings by Mr. Karim

Dr --- Drawings (reduction in equity)

Cr --- Mr Karim (expensed in P/L acc.)

2- Simple Drawings:

Dr --- Drawings

Cr --- Cash

3- Purchases are credited in P/L acc. from the Sales in the calculation of Gross Profit.

Sales - (Opening Stock+Purchases-Closing Stock) = Gross Profit

U can c that Purchases are actually credited from the sales figure.
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