Journal entry

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pulkit (Querist)
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26 May 2012 Sir,
I have a doubt in Journal entry.
Suppose i am a construction company and I constructs houses and buildings and after furnishing them I sell them. Now my question is that what will be the journal of purchasing electronic fittings, sanitary
materials, furniture to be fitted in the houses and buildings for the purpose of selling them.

electronics a/c dr.
To cash/creditor a/c
OR
purchases a/c dr.
to cash

Soumitra Basu

Soumitra Basu (Expert)
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26 May 2012 All the items are part of building for which you deal in. You can debit the item under Electronic Fitting, Sanitary Materials, Furniture etc. under the Purchase Account or you can open separate head. All expenditure has to be debited in Profit and Loss Account.

pulkit

pulkit (Querist)
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09 June 2012 i did not get the answer

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Soumitra Basu

Soumitra Basu (Expert)
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11 June 2012 You are a construction company. Your business is to construct building and sell them out. Here, building is not your fixed asset but goods what you deal in. Therefore, all goods which are required to construct the building should be treated as purchase account. Alternatively, you can open Cement Account, Iron Rod Account, Labour Wages Account, Sanitary Goods Accounts, Electrical Fittings Accounts separately under Purchase Goods. Obviously all the head shall be transfereed to Profit and Loss Account as expenses. Simultaneously, sales proceeds against builidng shall be treated as Sales.
I think you have understood, if not, ring me at 9434001177