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Hi,Plz guide me in connection with this basic query of purchase goods entry and his reflection on accountig equation(asset=capital+liability)
1.purchase goods double entry is.purchase account(expense) to cash account(asset).
2.But while posting it in to accunting equation,we treat purchase of goods as a increase in asset(conflict with above double entry debit aspect)
How i justify this to some one else.
explained answer is highly appreciated.When we purchase goods, then yes – the double entry is DR Purchases CR Cash (or credit payables if they are bought on credit).
We do not ‘post’ to the accounting equation. Posting is another word for doing the double entry, and the double entry is as above.
Th accounting equation is, like the Statement of financial position, simply a list of the assets and the liabilities.
If the goods purchased have not yet been sold and are therefore in inventory, then they will be listed as an asset.
There is no conflict.You really need to watch the lectures for Paper F3 (including the lecture on inventory) to understand the above.
None of the above is relevant to Paper F2, and so I am puzzled as to why you have posted your question here. In Paper F2, double entry and the accounting equation have no relevance at all.
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