A/c entry ...??????

Page no : 2

Seema (Jr. Accountant) (91 Points)
Replied 16 March 2012

Thanks for reply to everyone

but I have one more question ???

When we used 20 Bags .....

Why not Expenses A/c Dr To Sale A/c Entry Made

As per my knowledge this is related to VAT

Plz...............Describe details

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vinodh (Final ) (182 Points)
Replied 16 March 2012

Because in the said transaction is used for Business purpose.

hence it should be shown as reduction in purchase. and moreover No sale is made.

So Expenses A/c Dr

to Purchase Ac

will be right entry.......

If u pass the entry as u said then also the sotck will be adjusted. but at the same time it should not be done..

Bhargav K (Senior Associate/Articled assistant) (40 Points)
Replied 16 March 2012

Sale is a revenue. When u pass a sale entry debit should go to cash or debtors.

If u pass the entry

Expense Dr

To sales Dr

There will be no impact on yout financial books. as at one side u will book revenue and on the other u will book expense.

Since your bags are given free of cost, only cost has to be beared by the business no revenue is realised against the same hence u cannot book sales when there is no revenue.

Ateeq (CA - Final) (218 Points)
Replied 20 March 2012

Hi Seema,

In my opinion, you should create 2 ledgers one for stock and another for expenditure, as illustrated below: -

Stock consumed A/c Or Office Stock A/c (For stock, you can use any other suitable name as well),

and Personal consumption A/c (For expenses)

Then Pass the following entry: -

Personal Consumption A/c (at cost)

To Office Stock A/c.

Impact: - With this your gross profit will not get affected, other wise due to shortfall in quantity and valuation your gross profit will get affected.

Further:

Why not Expenses A/c Dr To Sale A/c Entry Made

Impact: -

Ans: Your sales will get inflated (Though not higly in this instance) and will distort the true & fair view of accounting. Since they are not actual sales it will not be appropriate to book as Sales. Further it will affect decision making and so on...