A manufacturing company produces flooring materials. Now if the company uses that material for its own flooring purpose, what would be the entry in accounts?
A manufacturing company produces flooring materials. Now if the company uses that material for its own flooring purpose, what would be the entry in accounts?
The Entry if required can be passed in the given manner :
Office Furniture A/c.. Dr
Stock - in- Trade
(at cost)
Alternatively, the same can be done by way of an adjustment in the Balance Sheet :
Increase the furniture amount and decrease the stock in trade by the cost of the materials used for own office flooring as generally, we don't see stock in trade account being credited.
One thing is not clear to me...as I have used "flooring materials" for the develpoment of office floor, why the furniture value be increased. In that case, what shoud I debit?
It is because the same has been used for the development of office and hence office furniture and fixtures is to be debited.
Alternatively, it can b debited to Office Expenses A/c
Sir,
As you manufacture furniture, the expenses you incurred for the same item you converted into asset will be accounted under Manufacturing Expenses A/c. So the entry will be...
Furniture A/c Dr.
To Manufacturing Expenses A/c ( incl. raw materials )
CAclubindia
