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Dear John,
i am so confused about the double entry for goods drawing, let start an example:
in the end of period, i have:
cash: $100
inventory at the end of period: $20payable: $60
sale revenue: $100=> cogs: (0 + 60) – 20 = $40
profit = 100 – 40 = $60so my accounting equation:
100 + 20 = 60 + 60
if in this period, i took $10 from inventory for personal using, the BPP book says the double entry for this entry is:
debit drawing $10
credit purchase $10– my question is how this entry will impact to purchase, ending inventory, COGS, sale revenue account?
– when we said the Purchase Control Account is that means the Payable Account for supplier? and in this case, why drawing is a credit in Purchase Control Account?
thanks in advance,
In future, please ask in the Ask the Tutor Forum if you want me to answer. This forum is for students to help each other 🙂
If inventory is taken by the owner, then the owner is charged for them (which is why we debit drawings) and the business has less goods for them to sell (which is why we credit purchases).
There is no such thing as a purchase control account. The purchases account records everything the business has bought (and again if some of the goods have been taken by the owner, then because we charge the owned for them, the purchases used by the business are reduced).
It is the payables ledger control account that records what is owed to the suppliers, and this is not affected – money is still owed to the supplier.
I really do suggest that you watch our free lectures. They are a complete course for Paper F3 and cover everything needed to be able to pass the exam well 🙂
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