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