Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

Personal accounting

jrmchess (na) (197 Points)

09 November 2013

Hi guys,

I am using an accounting system to maintain my personal finances and I have a question. Suppose I am treating my friend for dinner worth 100 rs and next day he treats me for dinner worth 200 rs. How should I make entries for these transactions and what accounts will be credited or debited? I have made some entries below. I hope I am right... thanks

Suppose my friend's name is Raju

Day 1: Cash a/c 100 Rs credit

Raju a/c 100 Rs debit (treated friend for dinner)

Day 2: Dinner a/c 200 Rs debit

Raju a/c 200 rs credit (dinner treat from Raju)

I would like to also know how would the accounts "Dinner" & "Raju" be treated as? Will they be shown on P/L statement or balance sheet?

Thanks

Reply
Follow
Share

6 Replies

RUPESH CHOUDHURY (Student) (484 Points)
Replied 09 November 2013

Dear

You are doing thing very complex and also looks weird..

anyway

entry for treat given :

Party / treat Expenses A/c(P&L)..........Dr 200

To Cash 200

(being party thrown for XX purpose @ XXX )

you cant use personal ledgers here..only if you borrow or lend money u can use the personal accounts..

and for treat received you cant record anything..since nothing tangible received from that..

My kind advice use simple expense managers instead of accounting software because u neither have accounting knowledge nor it is required indeed.

Thanks & regards

jrmchess (na) (197 Points)
Replied 09 November 2013

Originally posted by : RUPESH CHOUDHURY
	Dear You are doing thing very complex and also looks weird.. anyway entry for treat given : Party / treat Expenses A/c(P&L)..........Dr 200 To Cash 200 (being party thrown for XX purpose @ XXX ) you cant use personal ledgers here..only if you borrow or lend money u can use the personal accounts.. and for treat received you cant record anything..since nothing tangible received from that.. My kind advice use simple expense managers instead of accounting software because u neither have accounting knowledge nor it is required indeed. Thanks & regards

I agree with what u are saying. I was using a simple expense manager before but I found some shortcomings and hence decided to use an accounting package like gnucash. In the given problem I have only mentioned 1 friend but let's say u have more than 50 friends plus add to that relatives and neighbours, etc. we are constantly borrowing or lending from them. Hence using a simple expense manager becomes very difficult as I have to maintain separate excel sheets for them. Plus accounting packages like gnucash allow u maintain your personal finances like credit cards, investments, loans, etc. So I had decided on using it.

The solution you have given doesn't solve my problem as I will not know how much money I have taken from which of my friends. Hence I have to create a separate expense a/c for each of them.

RUPESH CHOUDHURY (Student) (484 Points)
Replied 09 November 2013

Dear

Thats is really subjective..

noone throws a party keeping in mind to get back the same from the respective people..

anyways for u ..instead of Debiting the party expenses Dr to the respective person's name and whenever u receive a treat from them the entry will be vice versa..

Thanks

Regards

jrmchess (na) (197 Points)
Replied 09 November 2013

Originally posted by : RUPESH CHOUDHURY
	Dear Thats is really subjective.. noone throws a party keeping in mind to get back the same from the respective people.. anyways for u ..instead of Debiting the party expenses Dr to the respective person's name and whenever u receive a treat from them the entry will be vice versa.. Thanks Regards

u got me wrong. let me explain. I and my friends go out to have to have lunch dinner or share a cab etc. we always share our expenses. so let's say today my friend pays for my dinner, tomorrow it will be my turn and so on. we share a lot of things like room rent, electricity bills, groceries, etc. So I wanted a system where I can track all these expenses and have no misunderstanding in the future over money spent. Also in the process of using an accounting package it would increase my understanding of accounting.

RUPESH CHOUDHURY (Student) (484 Points)
Replied 09 November 2013

since u used the word TREAT i think I was right in assuming so....but now I got ur point and really appreciate..

Example..

You 2 guys share the room the rent of which is Rs.10000.And u paid the fool for this month..

Rent a/c (P&L)...........................Dr 5000

Frind's A/c(Balance sheet)......Dr 5000

To Cash/Bank 10000

And say ur friend paid the full amount next time towards rent

Rent A/c.......................Dr. 5000

To Friend's a/c 5000

Hope u understand

Kindly feel free to revert if u have anu doubt..

Regards

1 Like

Mihir (Wealth Manager) (5293 Points)
Replied 09 November 2013

The entry shall be

Entertainment / restaurant expenses a/c

To Cash a/c

Narration: Expenses incurred in treating friend Mr. ABC to XYZ restaurant.

You may account for those expenses which you have incurred and paid for either by cash or by cheque. You cannot account for expenses incurred by your friend in treating you.