Advance payment of computer accessories

You have to make entry at the time of advance:

ABC (Supplier) A/c Dr

To Bank A/c Dr.

And as you are buying Computer, which is comes under fixed assets, so it will not affect in P/L account. So, you will have to make entry of computer purchase bill like this....

Computer A/c Dr

To ABC A/c Cr.

Sridhar

what is the date of invoice you received from seller?

shivani

29-3-13

1) Advance to ABC  15000   (Current Asset)

 To Cash/Bank 15000

2) If bill received till 31-3-13, then on the date of receipt of bill

If bill received from ABC

Computer 37200

To ABC                     22200

To Advance to ABC 15000

If bill not received from ABC till 31-3-13, then no entry on 31-3-13

3) April

if bill was received till 31-3-13

ABC 22200

To Cash/Bank 22200

If bill was not received till 31-3-13, then assuming that bill received on 15-Apr, entry on 15-Apr will be

15-Apr

Computer 37200

To ABC                     22200

To Advance to ABC 15000

Now Assuming that payment made on 20-Apr

20-Apr

ABC 22200

To Cash/Bank 22200

Experts please confirm.

Shivani

Dear Shivani,

What if Machinery is delivered and used on 29th March but Invoice is received after 31st.

Conclusion: Recording of transactions are based on time of happening instead of receiving of documents.

samrendra ji

u must b pulling my leg on asking me this question.

u very well know I freak out on invoice thing.

lol

shivani

Dear Shivani, 

In case stated above by me.......

If goods has received before reporting date but Invoice pertain to that goods is not received then goods has to include in books based on the receipt of goods to reflect true image of books.

Here in this case Fixed Asset is capitalized on 29th March instead of postponing the transaction.

For better understanding Entry will be like this

Fixed Assets A/c Dr.      xxxx

        To Provision for Purchase     xxxx   [classification Current Liability]

(being fixed assets received and used from xyz but invoice does not received)

In April upon receipt of Invoice

Provision for Purchase   A/c Dr.   xxxx

            To XYZ                                             xxxx

(being Invoice for fixed assets purchased and received on 29th March)

Hmm

Samrendra Ji Please recheck my following entries taking into account what you said:

29-3-13

1) Advance Payment Entry

Advance to ABC 15000 (Current Asset)

To Cash/Bank 15000

2) Fixed Asset Entry

Case - 1

If bill received till 31-3-13, then on the date of receipt of bill

Computer 37200

To ABC 22200

To Advance to ABC 15000

Case - 2

If bill not received from ABC and goods also not received till 31-3-13, then no entry on 31-3-13

Case – 3

If bill not received from ABC till 31-3-13 but goods received on 29-3-13, then entry on 29-3-13

 Computer 37200

 To Provision for Purchase 37200 (current liability)

3) Payment Entry in April

Case 1

If bill was received till 31-3-13

ABC 22200

To Cash/Bank 22200

Case 2

If bill was not received from ABC and goods also not received till 31-3-13, then assuming that bill and goods received on 15-Apr, entry on 15-Apr will be

15-Apr

Computer 37200

To ABC                     22200

To Advance to ABC 15000

Now Assuming that payment made on 20-Apr

20-Apr

ABC 22200

To Cash/Bank 22200

Case 3

If goods were received on 29-Mar but bill not received till 31-Mar, then assuming that bill received on 15-Apr, entry on 15-Apr will be

Provision for purchase 37200

To ABC 37200

Assuming payment made on 20-Apr

ABC 37200

To Advance to ABC  15000

To Bank 22200

I hope my entries are correcet.

Samrendra please suggest a better name than Provision for Purchase.

Kind of reads weird and also since we are purchasing computer which is a fixed asset, it cant be a purchase.

Shivani

Dear Shivani,

Seems good...... Look like recording is made on the basis of transfer of property instead of receipt of Invoice.

Name is not that relevant. You can put any other suitable name say Material/Fixed Assets receipt but not accounted

1)Advance payment entry can be made in books for the amount paid

2)Fixed Asset can be capitalised if it is proved that ownership  transfered to buyer and put to use before 31.03.2013 

.

.

you should have deliver challan and a valid proof to say that asset was put to use before the date of invoice...

.

.

I prefer to capitalize on basis date of invoice....in order to avoid all confusion

Dear Ganeshbabu,

I believe Material Receipt Note is more authentic document than Invoice.

Yes,,not possible to capitalize before mrn date