Accounting Journal Entries

F.Y. 2020-21

Paid Rs.5000 to Samarpan Electrical as advance for certain electrical work. Accounting entri was passed as following;-

11-11-2020           Electrical  Repair Expenses A/c.............Dr. 5000

                                           To Cash A/c.                                                  5000

(Audit Report was final and printed) 

F.Y. 2021-22

An Invoice of RS.15,000 receive on 22-08-2021 from Samarpan Electrical after completion of work. Paid Rs.10,000 by issuing Cheque on 25-08-2021.

NOW

How to adjust the difference of Rs.5000 already paid in P.Y. 2020-21????

What entry should be passed.????

Replies (5)
Quick Summary
This discussion addresses a common accounting challenge: how to correctly adjust an advance payment made in a previous financial year when the final invoice is received. The original entry incorrectly expensed the advance. The correct method involves treating the advance as a prepayment (a current asset) and then adjusting it against the final invoice and subsequent payments.

First you must make entries as per prepayments

Advance a/c

To Bank a/c

when you received invoice

Repairs a/c

To Creditor a/c

when you made payments

Creditor a/c 15000

To Advance a/c 5000 

To Bank a/c 10,00

had you recorded it this way, future problems would not have occurred 

 

 

Agree with above entries

for first entry we have to recrod  in journal ? 

It is the current asset. Prepayments ledger must be created. This is also like loans and advances. 

You don't have to worry now

Repairs and maintenance 10000

To Bank/cash a/c 10000

(Being amount due paid to for repairs) 

Then make a note that 5000 paid previously in last year. 

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