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EXAMPLE No.2 Goods in Trade

Generally, business maintain two different accounts for goods purchased and goods sold in the ordinary course of trade. Whenever goods are purchased for the purpose reselling them, these goods are debited to Purchases Account and when goods are sold, they are credited to sales accounts. Thereby, businesses use words sales and purchases rather than the word goods for the purpose of making double entries




   December 3.Goods Sold to Mr. A on credit worth $50,0000 
   December 5.Goods Purchased on account from Mr. X and Co. for $70,000  
   December 7.Received cash from Mr. A
   December 12.Paid cash to Mr. X and Co. for goods purchased on account
   December 22.Sold goods to Deadman for cash $5000





  DATE  DESCRIPTION FOLIO DEBIT CREDIT





   Dec. 3

   Debtor (Mr. A)

                    Sales

   $50,000

   
   

   $50,000





   Dec. 5

   Purchases

                    Creditor (Mr. X and Co.)

   $70,000

   
   

   $70,000





   Dec. 7

   Cash

                    Debtor (Mr. A)

   $50,000

   
   

   $50,000





   Dec. 12

   Creditor (Mr. X and Co.)

                    Cash

   $70,000

   
   

   $70,000





   Dec. 22

   Cash

                    Sales

   $5000

   
   

   $5000








EXAMPLE No.3 Sales Return and Purchase Return

Sales Return or Return inward
When goods sold by the business are returned back by the customer for defects in goods or any other reason, these goods are debited to Sales Return or Return inward account

Purchase Return or Return outward
When goods purchased by the business are returned to supplier for defects in goods or any other reason , these goods are credited to Purchase Return or Return inward account

Following are the transactions of a cotton agency


   January 3.Bought cotton on account form XYZ Co. $100,000 
   January 5.Sold cotton on credit to B Berry $5000
   January 22.Returned faulty cotton to XYZ Co. $1000
   January 25.Defective cotton returned by B Berry costing $350  
   




  DATE  DESCRIPTION FOLIO DEBIT CREDIT





   Jan. 3

   Purchases

                    Creditor (XYZ and Co.)

   $100,000

   
   

   $100,000





   Jan. 5

   Debtor (B Berry)

                    Sales

   $5000

   
   

   $5000





   Jan. 22

   Creditor (XYZ and co.)

                    Purchases return

   $1000

   
   

   $1000





   Jan. 25

   Sales return

                    Debtor (B Berry)

   $350

   
   

   $350