A BASIC TEST ON YOUR DOUBLE ENTRY:

Scenario:
The
owner of Raqut Services has just bought a vehicle for £60,000 for his personal
use and he has paid for it through the business bank account. What will be the
double entry posting for this?
Double entry posting:
DR:
Drawings account                   £60,000


CR:
Bank account                    £60,000
Reason:
The
vehicle which was bought is for the owner and not for the business, but the
business bank account has been used to make the payment, so it has to go
through the accounting records, but it will be accounted for as drawings and
debited to the drawings account as the drawings is increasing. It will not be
debited to vehicles account because the vehicle is not for the business.
We
have credited bank because bank account is paying out money and the balance in
the bank account is reducing; if an asset is decreasing, we credit the relevant
asset account.
REMEMBER:

DEAD/CLIC
Yours Sincerely,
The Friendly Team

The Training Place of Excellence Limited

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