Co.A ltd. recd amt from B and wrongly paid to C

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Amit Dutta (Querist)

06 September 2010 A ltd is company received amount of 100000 from B with Purchase Order but wrongly made the banking & sales entry in the books of C of 100000.Now C has been sold goods worth 20000.So he is not in condition to return the goods to A Ltd and he has also not sufficient balance to pay to A ltd.Now C requested to A ltd. to bill the same goods to him for the same value(Rs.20000).Now he returned all the goods(Rs.100000) to B and gave the declaration to A ltd that he has been received the goods of the same amount from C so he will not claim for the same amount in future.
The question is :-B and C settled their matter personally but wrong impact showing in the books of B & C.
Pls give the solution.

Thanks...

Thrissurkkaran Ishtan

Thrissurkkaran Ishtan (Expert)

06 September 2010 Very tricky Amit. The answer is as follows:

In the books of A
A recd amount from B - Cash Debit and B Credit Value Rs. 100,000
A sent goods wrongly to C - C Debit and Sales Credit Value Rs. 20,000
C asks A to bill the same value - But remember that A's original entry is incorrect and it has to be corrected. So a further "rectification" entry is required which is C Debit and Sales Credit Value Rs. 80,000
C sends goods to B - B Debit and C Credit Rs. 100,000
End Result Cash Debit and Sales Credit Value Rs. 100,000

In the books of C
Goods received from A - Debit Purchases and Credit A Rs. 20,000
Goods sent to B (on behalf of A) - Debit A and Credit Purchase(returns) Rs. 20,000
End result - NIL

In the books B
Cash paid to A - Debit A and Credit Cash
Goods received from C (on behalf of A) - Debit Purchases and Credit A
End Result - Purchases Debit and Credit Cash.

If you still have doubt, pls revert.

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