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Nancy and Jason are partners in several gift boutiques in shopping malls. The partners split profits nd losses equally and each takes an annual withdrawal of 80000. To even out the workload, Nancy travels around the country inspecting the stores. Jason manages the business and does all the accounting. From time to time, the partners use small amounts of store merchandise for personal use. I preparing for his daughters wedding. Jason took inventory that cost 10000. He recorded the transaction with a debit to Cost of Goods sold and a credit to merchandise inventory.
1. Do you think Jason’s actions were ethical? Why or why not?
2. How should Jason have recorded this transaction?
Expert Answer
Answer:
1. No, Jason actions are unethical because loss of profit will be suffered by nancy for goods taken or used for personal purpose by jason which does not comes under trading of goods. therefore it is refered as drawings made by the owner. so for this jason’s drawings account will be debited but not the cost of goods sold account
2.Journal entry
| particulars | debit | credit |
| Jason’s drawings account | 10,000 | |
| Inventory account | 10,000 |
