goods costing 5000 were purchased for various members of the staff and the cost was included in 'purchases'. a similar amount was deducted from the salaries of the staff members concerned and the net payments to them debited to salaries account.
pass the rectification entry for the above transaction.
Aarti, I must say that this is a very good question.
Let's understand the first part of the question. Goods that were purchased for staff members were included in purchases, however, these goods do not belong to the business, thus, we need to credit Purchases Account (earlier it was debited).
Now lets move on to the second part. Now the similar amount was deducted from the Salaries of concerned staff members.
Suppose that salary of Rs 1,00,000 is provided to the members, but Salary Account was debited with Rs 95,000 (1,00,000 - 5,000). So, Salaries Account should be debited with Rs 5,000 more as the expenses of goods purchased cannot be deducted from Salaries.
Thus, the rectificationn entry will be:
Salaries A/c Dr. 5,000
To Purchases A/c 5,000
Hope this answers your query. Keep Posting!!!
Let's understand the first part of the question. Goods that were purchased for staff members were included in purchases, however, these goods do not belong to the business, thus, we need to credit Purchases Account (earlier it was debited).
Now lets move on to the second part. Now the similar amount was deducted from the Salaries of concerned staff members.
Suppose that salary of Rs 1,00,000 is provided to the members, but Salary Account was debited with Rs 95,000 (1,00,000 - 5,000). So, Salaries Account should be debited with Rs 5,000 more as the expenses of goods purchased cannot be deducted from Salaries.
Thus, the rectificationn entry will be:
Salaries A/c Dr. 5,000
To Purchases A/c 5,000
Hope this answers your query. Keep Posting!!!