Accounting entry needed


rima (ca)     13 July 2017

rima
ca 
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Your company gives a coffee machine to a client free of cost on the condition that all the materials needed for the coffee machine needs to be purchased from the company itself for 3 years. After 3 years the coffee machine becomes of the client.

What is the journal entries for the company giving the machine and the client?

avater

Balasubramanian R (Chartered Accountant)     13 July 2017

Balasubramanian R
Chartered Accountant 
 4 likes  82 points

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1. Debit                            Coffee Machine Account (Cost)

2. Provide Deprciation @ 15% (1st and 2nd Year)

3. At the end of 3rd year write off fully the balance in Coffee Machine account debiting Deprciaion Account.

No entry in Client books for Coffee Machine.

Pass entry for regular purchase and sale  of materials in both books.

 

avater

Balasubramanian R (Chartered Accountant)     13 July 2017

Balasubramanian R
Chartered Accountant 
 4 likes  82 points

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1. Debit                            Coffee Machine Account (Cost)

2. Provide Deprciation @ 15% (1st and 2nd Year)

3. At the end of 3rd year write off fully the balance in Coffee Machine account debiting Deprciaion Account.

No entry in Client books for Coffee Machine.

Pass entry for regular purchase and sale  of materials in both books.

 

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294)     14 July 2017

Rama chary Rachakonda
Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294 
 63 likes  1084 points

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In my opinion, 

(1) debit coffee machine account (with cost)

credit Bank account.

(2) depreciation account ( with value of depreciation) 

credit coffee machine account ( for 1 & II years depreciation respectively)

(3) Advertisement account debit (with balance amount)

depreciation account debit

to coffee machine account.

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Victoria (Workout)     09 September 2019

Victoria
Workout 
 90 points

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As for me, it's big fat cheating. Frankly speaking, it's better to buy your own coffee machine and not to be obligated to someone. It's my own point of view, but I think, that you overpay about 3 prices of the coffee machine, buying all the stuff for it during 3 years. I have the thought to purchase the coffee machine in this way, but I have read a good article about comparing two types of coffee machine (Keurig K50 and K55 simply because these coffee machines were the best I found on the market), where I have seen their prices, calculated their and all needed for it costs for 3 years and made a decision, that it will be more economical to buy my own coffee machine. Moreover, I will drink natural coffee) If you want to read this article and to calculate by yourself you have to click here


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