ADVANCE PAID TOWARDS PURCAHSE OF PLOT

WHAT WILL BE JOURNAL ENTRY FOR  THE ADVANCE PAID TO THE SELLER TOWARDS PURACHSE OF PLOT  AND UNDER WHAT HEAD IT SHOW BE SHOWN 

 

 

Replies (9)
Quick Summary
This discussion clarifies the journal entry for an advance paid towards purchasing a plot. Initially, it's suggested to debit 'Advance to Seller' and credit 'Bank'. However, if the plot is for personal use and paid from business funds in a sole proprietorship, it should be treated as drawings. The correct entry involves debiting 'Drawings Account' to 'Bank Account', and then transferring drawings to the 'Capital Account'.

Advance to Seller A/c Dr
To Bank A/c Cr
( Advance to seller for purchase of plot)

Advance to Seller A/c , under Loans & Advances, Asset Side Balance Sheet. ( I hope plot is for business purpose)

not for business but for personal plot 

Is it a Sole proprietorship ?.

YES ITS SOLE PROPRIETORYSHIP

So , money paid from business to purchase personal plot , is it Correct ?.

YES THE AMOUNT IS PAID FROM BUSINESS

Are going to show this plot , as an Fixed Asset or Non Current Asset in your Sole proprietorship Balance sheet ?.

IT WILL BE SHOWN AS FIXED ASSET

As per AS 10 ( Accounting Standards) , If plot is solely for personal use then you Can not show as fixed asset in the Balance sheet , (please refer AS 10) , So amount withdrawn from business to purchase personal plot will treated as Drawing, and will be debited to Capital Account.

Drawing A/c Dr
To Bank A/c Cr
( amount withdrawn from Business for personal purpose)

Capital A/c Dr
To Drawings A/c Cr
( Drawings transfer to Capital account)

Take more opinion on this.

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