Debiting Creditor and Crediting A debtor?????

This query is : Resolved

A D - Loving Life (Querist)
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17 August 2009 I Wanted to know why we do such entry in this situation
entry is:
Creditor a/c dr
Debtor a/c cr
SITUATION::
OUR FIRM NAME IS "ABC IRRIGATION" AND "XYZ IRRIGATION" IS THE FIRM FROM WHOM WE PURCHASE. NOW XYZ HAS PROVIDED A CHEQUE RECEIPT WITH NAME OF PERSON FROM WHOM PAYMENT IS RECEIVED.THEN Y WE DO THE ABOVE ENTRY IN OUR BOOKS WHEN WE HAVE NO RELATION BUT THE LEDGER OF OUR A/C IN XYZ BOOKS SHOWS CR BALANCE OF THAT AMOUNT???
I M TOTALLY CONFUSED ?
CAN ANYONE EXPLAIN ME THIS SITUATION?
PLEASE ITS URGENT

Chinmay Kamat

Chinmay Kamat (Expert)
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18 August 2009 maybe your debtor paid directly to your creditor.

or you endorsed the cheque received from your debtor to your creditor.

or the debtor has undertaken to pay that creditor.

CA. Amit Daga

CA. Amit Daga (Expert)
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18 August 2009 customer is paying to supplier.. thatswhy from ur balance sheet instead of increasing the debit balance ur credit balance is decreased

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CA Binal Shah

CA Binal Shah (Expert)
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18 August 2009 agree with chinmay & amit.

Though u dnt hv any direct relation but indirectly u r affected by this transaction as ur creditor received payment from ur debtor instead of u,in this way nw u dnt hv any liability towards ur creditor,at the same time ur debtors wil also not hv any liability towards u,so u hv to decrease ur liab by debiting creditors and at the same time u hv to decrease ur receipt by crediting debtors.

In this case no cash folw is involved at ur side so u hv to pass the entry as below:

Creditors a/c dr.
To debtors a/c
(being amt. paid by debtors to creditors on behalf of us by cheque no....dated....)

I hope u r cleared now...

Have a nice day!!!