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Owner expenses

RAVIKUMAR (STUDENT) (107 Points)

10 January 2013

when a owner of a business spends his own money for his busines , that is , petty expenses , not capital expenses, and later gets reimbursed from his business , hw should i record the entries ?

for example he bought printer ink for 2000 and later took money from his business ....

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14 Replies

Anil Sankar V (CA) (1877 Points)
Replied 10 January 2013

Just write down Simple entry for expense a/c dr To cash a/c

Ashish Porwal (Assistant Manager - Audit & Assurance) (77 Points)
Replied 10 January 2013

maintain a current capital A/c for recording such transactions

CA Lokesh Pokharna (CA (Ahmedabad Bhilwara Chittorgarh)) (4128 Points)
Replied 10 January 2013

printer/office exp. a/c dr . 2000

to capital a/c 2000

capital a/c 2000

to bank a/c 2000

Gaurav Toksha (Student CA IPC / IPCC) (73 Points)
Replied 10 January 2013

from the above problem
owner is bringing capital to the business

and therefore it is capital introduced

asset a/c -----dr
TO capital a/c

and then he is drawing the money from business

capital a/c ----dr
To cash/bank a/c

Antony Jacob (FINANCIAL ACCOUNTANT) (30 Points)
Replied 15 January 2013

printer(Asset). a/c dr . 2000

to capital a/c 2000

capital a/c 2000

to bank/cash a/c 2000

Vardan Singh Sengar (Accounts Manager in Private Company) (433 Points)
Replied 16 March 2013

why we are using capital account here??

Nazia (Asst Manager - Finance) (139 Points)
Replied 21 March 2013

Good question Vardan. Actually we should not use capital a/c. Instead create a ledger in individual's name & treat it as advance received & settle by cash repayment.

Because owner is not bringing the cash with the intent to increase his capital, he is just lending money to business temporarily.

1 Like

RAVIKUMAR (STUDENT) (107 Points)
Replied 21 March 2013

nazia , can u then pls give the related entries for such a transaction. pls specify what type of account head it will be (like asset expense etc ). pls help since am new to this field.

I also have one more question

a business owner has two shops A and B. He buys some items (for eg non inventory like stationaries in bulk) for 2000 and transfers items worth 750 to be used in shop B. What are the entries in shop A. Now shop B owes Shop A 750.

in shop A records

Dr stationaries expense 2000

Cr cash 2000

and regarding the transfer of items

Dr Receivables from B 750

Cr ????????

should it be treated as a sale at cost price

Nazia (Asst Manager - Finance) (139 Points)
Replied 22 March 2013

Create a ledger in the owner's name under current liabilities & post the following entries:

1. for purchase: Expense a/c dr To X (owner) a/c

2. for payment: X (owner) a/c dr To Cash/Bank a/c

Nazia (Asst Manager - Finance) (139 Points)
Replied 22 March 2013

Yes it should be treated as sales at cost price. Explain the transaction clearly, so that i can give u entries, like which shop purchases for how much, etc., & whether payment has been made or its just a transfer?

RAVIKUMAR (STUDENT) (107 Points)
Replied 22 March 2013

Shop A Purchases stationaries worth 2000 for cash and transfers stationaries worth 750 to shop B . Now shop B owes shop A 750. Pls help me with entries in shop A's books. Payment has not been made by shop B yet.

Jishnu Surendran (Finance Manager) (312 Points)
Replied 23 March 2013

Ravi,

To use Capital A/c or to create a separate account for the type of transactions you've said is entirely your judgement. If there are many transactions like this it would be better to create a separate account for it.

And about the shop transfers you've said...entries need to be passed only if you treat the shops as separate accounting entities.

just pass this entry for transfer....

Printing & Stationery A/c Dr. 750 ( if this is the account you are operating for stationery, if other, as your books )

To Shop A A/c 750