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What journal entry is required to record goods taken from inventory by the owner of a business?
A.Debit Drawings and Credit Purchases
B.Debit Sales and Credit Drawings
C.Debit Drawings and Credit Inventory
D.Debit Purchases and Credit DrawingsPlease, can you expplain to me correct naswer and the logic behind it, bc i taught it was C. thank you
The correct answer is A
The reason is that when the company buys goods the entry will be to Dr Purchases Cr Cash (or Payables).
If some of those goods are taken by the owner then they need removing from the purchases and so we Dr Drawings and Cr Purchases.
The reason that we do not make any entry in the Inventory Account is because the Inventory is only recorded at the end of the period (and I do explain this in my free lectures). At the end of the period the inventory will not be including anything taken by the owner anyway because they will already have taken it 🙂
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