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CBSE Class 11-commerce Answered

Raj, the proprietor of Yashraj Company gifted his wife jewellery worth Rs. 1,50,000 from Swarn Jewellers and made the payment issuing a cheque from the account of Yashraj Company. His accountant debited the Drawing A/c. But Raj was of the opinion that Fixed Asset A/c should be debited. Is he right? Answer with reasons.
Asked by Topperlearning User | 09 Jun, 2016, 12:14: PM
answered-by-expert Expert Answer

No. Raj is not right. As per the business entity concept, business has a distinct entity from its owners. It implies that all the business transactions are recorded from the business point of view and not owners.

Here, jewellery purchased by Raj is for his personal use (i.e. personal use of the owner) and therefore Drawing A/c has been debited. 

Answered by | 09 Jun, 2016, 02:14: PM
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