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JAMB Principles of Accounts 2006 Question 1

Question 1

Double Entry and the Ledger

Fatima withdraws goods from the business for personal use. The accounting treatment is to debit

  1. A.stock account and credit profit and loss account
  2. B.drawings account and credit stock account
  3. C.profit and loss account and credit drawings account
  4. D.stock account and credit drawings account.
Show the answer and explanation

Answer: B (drawings account and credit stock account)

Explanation

Goods taken by the owner reduce the business's goods and increase drawings, so debit drawings and credit stock (purchases).