17 August 2009
I Wanted to know why we do such entry in this situation entry is: Creditor a/c dr Debtor a/c cr SITUATION:: OUR FIRM NAME IS "ABC IRRIGATION" AND "XYZ IRRIGATION" IS THE FIRM FROM WHOM WE PURCHASE. NOW XYZ HAS PROVIDED A CHEQUE RECEIPT WITH NAME OF PERSON FROM WHOM PAYMENT IS RECEIVED.THEN Y WE DO THE ABOVE ENTRY IN OUR BOOKS WHEN WE HAVE NO RELATION BUT THE LEDGER OF OUR A/C IN XYZ BOOKS SHOWS CR BALANCE OF THAT AMOUNT??? I M TOTALLY CONFUSED ? CAN ANYONE EXPLAIN ME THIS SITUATION? PLEASE ITS URGENT
Though u dnt hv any direct relation but indirectly u r affected by this transaction as ur creditor received payment from ur debtor instead of u,in this way nw u dnt hv any liability towards ur creditor,at the same time ur debtors wil also not hv any liability towards u,so u hv to decrease ur liab by debiting creditors and at the same time u hv to decrease ur receipt by crediting debtors.
In this case no cash folw is involved at ur side so u hv to pass the entry as below:
Creditors a/c dr. To debtors a/c (being amt. paid by debtors to creditors on behalf of us by cheque no....dated....)
CAclubindia
