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
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
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...
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