entries for the sale two wheeler by a showroom to a customer. after down payment the customer

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This query is : Resolved

Irudayarab Rajan (Querist)

31 May 2024 a customer taking a two wheeler from a showroom by giving down payment for balance the customer arrange Finance co. The finance company released balance payment. How can we pass entry for such sale to customer in bike show room accounting

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

06 July 2024 To account for the sale of a two-wheeler to a customer through a showroom where the customer arranges financing through a finance company, you would typically follow these steps in your accounting system:

1. Initial Sale Entry (For Down Payment):

Assume the total selling price of the two-wheeler is Rs. X, and the customer pays a down payment of Rs. Y. The balance amount (Rs. X - Y) is financed by the finance company.

• Dr. Bank Account (Y): Record the receipt of the down payment amount in your bank account.
• Cr. Sales Account (Y): Record the revenue from the sale of the two-wheeler.

2. Financing Arrangement:

The finance company provides the balance amount (Rs. X - Y) directly to the showroom on behalf of the customer.

• Dr. Bank Account (Rs. X - Y): Record the receipt of the balance payment from the finance company.
• Cr. Finance Company Payable Account (Rs. X - Y): Create a liability account to reflect the amount owed to the finance company.

3. Final Entry (Completion of Sale):

Once the entire payment process is completed, and the two-wheeler is delivered to the customer:

• Dr. Finance Company Payable Account (Rs. X - Y): Clear the payable to the finance company.
• Cr. Inventory or Cost of Goods Sold Account (Cost of the Two-Wheeler): Reduce the inventory or record the cost of goods sold for the two-wheeler sold.
• Cr. GST Input Account (if applicable): Record the GST input on the sale.

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