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Difficulty: MediumTreatment of Owner's Capital, Drawings, and Goods Withdrawn

Kola, a sole trader, recorded total purchases of ₦2,450,000₦2,450,000 for the financial year ended 31 December 2025. During the year, Kola took goods costing ₦65,000₦65,000 (with a retail selling price of ₦85,000₦85,000) from the business for personal family use. If no adjustment has been made for the withdrawn goods, what is the adjusted purchases figure (in ₦₦) to be reported in the Trading Account?

Answer: 2385000 ₦

Answer

The adjusted purchases figure to be reported in the Trading Account is ₦2,385,000.
When a sole trader withdraws goods for personal use, the double entry requires debiting Drawings Account and crediting Purchases Account at cost price (₦65,000₦65,000). The adjusted purchases figure included in the Trading Account is calculated by subtracting the cost of withdrawn goods from unadjusted purchases (₦2,450,000−₦65,000=₦2,385,000₦2,450,000 - ₦65,000 = ₦2,385,000).

Step-by-Step Solution

1
Identify the appropriate valuation for goods withdrawn by the owner.
The cost price of ₦65,000₦65,000 must be used, not the selling price of ₦85,000₦85,000.
A business entity does not realize profit on goods consumed by its owner; therefore, withdrawals are measured strictly at cost.
2
Calculate the adjusted purchases figure for the Trading Account.
₦2,450,000−₦65,000=₦2,385,000₦2,450,000 - ₦65,000 = ₦2,385,000.
Deducting goods withdrawn from total purchases ensures that cost of sales reflects only goods available for sale to external customers.

Key Concept

Adjustment of purchases for goods withdrawn by owner at cost price
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Topics

Treatment of Owner's Capital, Drawings, and Goods Withdrawn

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