Transactions relating to goods, Accounting Standards

The term goods refer to articles that are traded through the firm   articles bought for resale. For illustration, for book seller, books are goods, for an electrical store fans, for a furniture dealer table and chairs are goods and another electrical item are goods. Articles bought,  for utilizing them in business are not to be acted as goods. They may fixed assets or consumables and are to be reacted as in books of account.

The transactions relating to goods comprise purchases, sales, purchases returns and sales returns. Usually, as per rules, while goods are bought you will debit the Goods Account and while they are sold you will credit the Goods Account. Also, while goods are returned through your customer you will debit the Goods Account and while you return goods to the suppliers, you will credit the Goods Account. Conversely, for all transaction concerning to goods you will keep only one account that is: Goods Account. But, in practice, separate account is kept, as demonstrated below:

i) Purchases Account for recording all purchases of goods

ii) Sales Account-for recording all sales of goods

iii) Returns onwards account or Purchases Returns Account recording goods returned to suppliers

iv) Returns Inwards Account or Sales Returns Account: For recording goods returned through customers

v) Stock Account: for goods in stock as unsold goods as at the end of the year.

Hence, goods are purchased you will debit for the Purchases Account and while they are sold will credit the Sales Account. As the same, while goods are returned through your customers you will debit the Returns Inwards Account or Sales Returns Account and while you return goods to the suppliers you will credit Returns Outwards or Purchases Returns Account. There will be no Goods Account at all. It assists in ascertaining the amount of purchases and sales more correctly and rapidly.

Posted Date: 4/3/2013 6:13:47 AM | Location : United States







Related Discussions:- Transactions relating to goods, Assignment Help, Ask Question on Transactions relating to goods, Get Answer, Expert's Help, Transactions relating to goods Discussions

Write discussion on Transactions relating to goods
Your posts are moderated
Related Questions
Loss and Profit Account is prepared so as to discern whether the firm has made net profit or suffered net loss for a specified accounting period. Such account deals along with indi

You must be aware about the most of business are made through cheques these days. It involves the bank whether the firm has opened its own account. Thus when payment is made by che


Describe three examples of financial accounting practices and for each, explain how the practice assists in the decision making process

Consisting mainly of accounting educators the American Accounting Association (AAA) has sought to encourage research and study at a theoretical level into the concepts or standards

Q. Accounting Education Change Commission? Accountants in practice as well as business executives have generally been dissatisfied with accounting graduates' capability to thin

International Accounting Standard Committee ( I. A. S.C. ) Defines inventories as Tangible property) a. Held for sale in the ordinary course of business. b. In the proces

Direct expenses comprise all those expenses incurred in bringing the goods to the place of business or trade or in-production process till the goods are placed in saleable places.

These comprise goods purchased only for production and selling purposes. Goods utilized as assets and not for sale are not comprised in this head. Net purchase is the dissimilarity

1. Trading account is prepared so as to calculate gross profit or loss, whereas the function of the profit and loss account is to disclose net profit or loss. 2. Trading account