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Im currently doing an exercise for the topic “incomplete record”
And this question made me confused.
As far as i know
Owner took cash for personal use = Dr Capital Cr Cash
Owner took goods for personal use = Dr Capital Cr PurchaseSo what about took “CASH” from the “cash received from SALES” for personal use?
Im guessing its Dr Capital Cr Cash sales.
But why cash sales, i myself also dont understand…
Cr cash sales is income increase, owner took cash for personal use so capital decrease BUT why income increase??Please correct me if anything i said was wrong
Cash from cash sales will be paid into the bank.
However, if the owner takes some of the cash then the amount paid into the bank will be less than the actual sales.
Suppose 9,000 is the amount banked (Dr Bank; Cr Cash)
Suppose the owner had taken 1,000 before banking the cash (Dr Capital Cr Cash).That means that the cash received from cash sales must have been 10,000, so Dr Cash Cr Sales.
So what about the entry for “Owner used 2000 of the cash from cash received from sales to pay for his private home repair?”
Exactly the same – it does not matter what he used the cash for.
Incidentally the correct entry when the owner takes cash is Dr Drawings Cr Cash (although increasing drawings does obviously end up reducing the capital.
Have you watched my free lectures, because I do explain all this in the lectures. They are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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