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







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