Factory exp

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2013 tools purchased for the manufacture of products. like it is being used for the finishing of the products. what will be journal entry? thks

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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13 July 2013 Stores & Spares a/c dr
to Cash/ bank a/c

Querist : Anonymous

Querist : Anonymous (Querist)

13 July 2013 stores and spares a/c will go under direct exp head in tally, right?

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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13 July 2013 THEY ARE ASSETS SHOWN IN BAL SHEET.

Ganeshbabu K

Ganeshbabu K (Expert)
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14 July 2013 1)Above suggested entry is not journal entry it is payment entry it will be holds good when you made cash purchase of tools..means payment and grn of tools should be in same date to pass such entry..which generally may not be possible..

if tool was purchased then purchase voucher to be passed first and respectively stock register should updated as and when tools taken to factory with GRN..and when ever you have used tool it will goes to consumption.

So Suggested entries will be

1)Dr.tools A/c(under current asset)
Cr.To Supplier Account A/c

(being tools purchased--please not your stock should update here.)

2)Dr.Supplier Account A/c
Cr.Bank A/c
(being payment made to supplier)

3)Dr.Spares & consumables A/c(consumption entry--can be in direct expense)
Cr.Tools A/c

(being tools used )--should go to consumption Consequently stock will come down and remaining tools not used will be shown in stock under current asset.

Thanks & regards
Ganesh babu k

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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14 July 2013 IN QUESTION NOWHERE ITS MENTIONED THAT TOOLS ARE PURCAHSE ON CREDIT??????

AND HE HAS ASKED FOR ACCOUNTING JOURNAL ENTRY MR GANESH BABU PLS READ IT PROPERLY?????

IT NEEDS TO BE BOOKED IN TALLY UNDER PAYMENT VOUCHER.

Ganeshbabu K

Ganeshbabu K (Expert)
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14 July 2013 Dear author We cannot capitalize tools--

1)it is a spares only.
2)tools used in machinery will be consumption
3)tools not used in machinery will be shown as stock under current asset only

Please note we cannot say tool will increase the efficiency of machine or it will not satisfy capitalization conditions

We cannot say that tool can be used for more than 3 or 5 years...

1)it may breakdown in before 1 year also

2)Even though it is used definetely for more than year we cannot capitalize it..concept of materiality should be considered here before capitalization--
(i)Suppose if you take car of cost 1.5 crore any spare of car will be cost in range of 20000 more only we cannot capitalize it knoe..in the same way..we cannot capitalize it as fixed asset..

In short unused tools as on 31.03.2013 is shown as stock under current asseet.

Querist : Anonymous

Querist : Anonymous (Querist)

15 July 2013 thks for the information

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