Goods costing Rs. 12,000 are withdrawn by the owner for personal use. What is the appropriate treatment in determining business profit?
Correct answer: B. Treat them as drawings
- A. Add them to sales
- B. Treat them as drawings
- C. Add them to creditors
- D. Treat them as an expense
Explanation
Goods taken by the owner are not business sales and represent drawings in kind. Their cost is deducted from business purchases or otherwise recorded against the owner's capital account.
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About Incomplete Records
Incomplete records require profit and financial position to be reconstructed when a complete double-entry system is unavailable. Methods include statements of affairs, capital comparisons, control accounts, cash summaries and margin calculations to find missing sales, purchases, expenses, assets, liabilities and drawings, while distinguishing business profit from changes in capital.
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