Journal entry

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Querist : Anonymous

Querist : Anonymous (Querist)

04 March 2013 Journal Entry of Reserve use for Purchase of a Fixed Assets

CA Parul Saxena

CA Parul Saxena (Expert)
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04 March 2013 Fixed Asset Dr.
To Bank

Hemant Kumar

Hemant Kumar (Expert)
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04 March 2013 1) Reserve Fund Ac Dr
To Fixed Asset Ac.

2) To Fixed Asset Ac. Dr
To Party Ac.

2) Party Ac.Dr.
To Bank Ac.

Or

1) Reserve Fund Ac Dr
To Fixed Asset Ac.

2) To Fixed Asset Ac. Dr
To Bank Ac.

CA Parul Saxena

CA Parul Saxena (Expert)
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04 March 2013 mr. hemant kumar the entries you have mentioned will not show fixed assets in books...

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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04 March 2013 If reserve fund is being used the,

1. Fixed Assets A/c Dr To, Party/Bank A/c

2. Reserve Fund (Specific) A/c Dr To General Reserve

CA Prashant Gupta

CA Prashant Gupta (Expert)
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04 March 2013 agree with CA Suraj Lakhotia

Hemant Kumar

Hemant Kumar (Expert)
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04 March 2013 @ CA Suraj Ji ....Total Reserve will be remain same... and it will be showing Fixed Assets purchase from Current Assets not using of Reserve.

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)
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04 March 2013 @ Hemant Kumar,

If you carefully see the entry no 1,

It is crediting Bank/Cash account which are part of current assets.

Since the query was regarding purchase out of Reserve, meaning purchased out of reserve meant for the purpose of purchase of assets, the second entry is passed.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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06 May 2020 @ Hemant Kumar Ji, Can you explain the basic concept behind purchase of assets with reserves. I am not getting it clearly.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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22 May 2020 Ok Got It...

It will be normal entries. If you had credited any specific reserve for asset purchase after the purchase is completed it needs to be reversed.

Question: A business wants to reserve funds for a future building construction project. It credits a Building Reserve fund for INR 5 million and debits retained earnings for the same amount. The building is then constructed at a cost of INR 4.9 million, which is accounted for as a debit to the fixed assets account and a credit to cash. What happens when the building is completed?

Answer: The original entry is reversed, where INR 5 million will be debited to the building reserve account and credited to the retained earnings account.