Adjustment of Goods used for Personal Purpose in Final Accounts (Financial Statements)

When the businessman withdraws the goods out of business for their personal use then these are treated as Drawings and is treated as an asset that is recoverable in future.

Adjustment

A. If Goods used for Personal Purpose are given outside the trial balance

In such case, two entries will take place:

• Deducted from Purchases A/c in the Trading A/c.
• Deducted from Capital A/c in the Liabilities side of the Balance Sheet.

B. If Goods used for Personal Purpose are given inside the trial balance

In such a case, these are deducted only once from the Capital A/c in the Liabilities side of the Balance Sheet.

Illustration:

Following are some of the balances that appear in the books of Mr Haider.

The following adjustments have to be made:

1. Further bad debts amount to ₹2,500, Provision for Bad debts to be made at 5%, Provision for Discount to debtors @2%.

2. Goods are given away as charity amounting to ₹10,000.

3. Goods drawn for personal use ₹5,000.

4. Goods amounting to ₹15,000 were destroyed by fire and the insurance company admitted the claim for only ₹10,000.

5. Closing Stock amounts to ₹10,000

Solution: