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Frineds pls help me

Sindhuja (Final Student) (113 Points)

17 December 2013

Prior to 2011, While accounting for Gift voucher sale, there happaned to be a problem.

On making sale:
GV Sale a/c Dr.
To Sales a/c

On redemption of Gift Voucher Coupons:
Party a/c Dr.
Sales a/c

As per the above entries, the income was accounted twice( first when sale is made, next at the time of redeeming GV again accouted as sales). The sale accounted was closed in the respective years, but the GV a/c, Which was grouped as Debtors, was still in our balance sheet. How to close this GV a/c in books???

Kindly help me out friends

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5 Replies

Hojefa (Ca final) (178 Points)
Replied 17 December 2013

Dear,

if u seen ur own entries properly u'll find out that u had credited sales A/c twice which is error.

Sales A/c only credited once that is in 1st entry. Hence, then at time of closing it will be trtf to trading A/c.

While G.v should be credited in 2nd entry. i.e party A/c Dr.

To GV Sales A/c.now u ll see that Gv Sales A/c got closed & only Debtor will be

stood in B/s.hope it ll help u.

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Sindhuja (Final Student) (113 Points)
Replied 17 December 2013

Prior to 2011, While accounting for Gift voucher sale, there happaned to be a problem.
Entry made by the company
i)On making GV sale:
GV Sale a/c Dr.
To Sales a/c
ii)On redemption of Gift Voucher Coupons, the entry was wrongly made as:
Party a/c Dr.
To Sales a/c
As per the above entries, the income was accounted twice( first when sale is made, next at the time of redeeming GV it was again accouted as sales). The sale accounted was closed in the respective years, but the GV a/c & the party a/c are still carried in our balance sheet. How to close these 2 a/cs in books???

Since it happens to be a company, books of accounts for all those previous years have been adopted in AGM. Hence previous year accounts can't be changed.

I don't want to carry those accounts to future years, How to close these accounts???

Hojefa (Ca final) (178 Points)
Replied 17 December 2013

Dear,

Now u hav wrote ur full query gud.

this is considered as a prior period item for co. if it will recorded now.

but entry could be passed like this. P &L A/c Dr

to GV Sales. by passing this entry g.v sales a/c will close while if debtors have been realised then bank a/c dr to debtors a/c to be passed if not then debtors will remain stand same as earlier.

logic:By passing 1st entry its shows curr year profit will be decrease and it will come actual profit because in past yr by passing 2 times credit in sales a/c p& l was credited more so profit was more, hence now profit will be actual. but in audit report disclosure should be made as per AS-5. hope now ull be clear. ( Note:-This is my own opinion, answer may come diffrently so try to get suggestion from expert also then better to proceed).

Sindhuja (Final Student) (113 Points)
Replied 18 December 2013

But friend, How could it be a prior period item?
The term ‘prior period items’, as defined in this Accounting Standard 5 , refers only to income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods.

Moreover AS 5 says, "Errors may occur as a result of mathematical mistakes, mistakes in applying accounting policies, misinterpretation of facts, or oversight."

Hojefa (Ca final) (178 Points)
Replied 18 December 2013

Thathswhy in last i had written this is my own opinion,

but according to myself due to sales A/c credited 2 times (error) in prior period its effect

in P& L A/c (i.e profit was increase at that time), so now passing reverse entry in C.Y (i.e by debiting P&L A/c) profit will get reduce n GV sales A/c also will be closed as i suggest in my above reply. may be expert will give u better reply on this.

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