Advance Voucher Entry - How ?

 Hello Gurus,



I am new to accounts and learning it through you.
I want ot understand some voucher entries. Please
suggest me correct.


Let's take a scenario. A company Sales some products.
The sale is made to different Parties. All parties 
has deposited some advance (here I assume full advance)
The company has to maintain Balances of all parties.


Here is two methods ( 1 and 2) with two cases each
(Please correct if I am wrong in any entry)




Method 1 : Using Advance A/C
=======================


Case A (When Advance is given by XYZ party) as Cash


Cash A/C Dr       100
To Advance A/C       100


Case B (When a Sale is settled with XYZ's Advance)


Advance A/C Dr      100
To Sale A/C            100




Metod 2 : Using Party A/C
===================


Case A (When Advance is given by XYZ party) as Cash


Cash A/C Dr 100
To XYZ A/C       100


Case B (When a Sale is settled with XYZ's Advance)


XYZ A/C Dr      100
To Sale A/C     100






I think Method 2 is good (b'cos Balance of each aprty
will be maintaned and I can see the ledger of any party
and in narration I can put Recipt No. for refference.




While Method 1 can tell only consolidated Advances by 
parties.


------------------------------------------------------
Is there any method, pleaes tell me.


Thanks
 
Replies (3)
Originally posted by :Shrikaanth V B
" Your entry

Cash A/C Dr       100

To Advance A/C Dr   100

and



Cash A/C Dr 100

To XYZ A/C Dr   100

are fundamentally incorrect. You cannot put "Dr" wen u r creditin an account. Otherwise both accounting treatments are correct. U can choose whichever u wan depending on control over balances and volume of transactions.



 
"

 

Thanks Shrikaanth

Yes there was mistake ("Dr"), this was typing mistake generated while copy and past text.

I rectified it so that other reader will not confuse.

Party entry was enough to keep track of each party a/c cash a/c dr. party a/c cr.
Originally posted by :angel0in
"

 
hello freind

your second method was correct but assume a situation that at the year end you does not make settelment to your party as against his advance payment.so in that case you have pass one more entry to show his libility on you company as cuurent libility

eg.you debtor has a CR balance in that case you have to pass following entry

XYZ A/C              Dr

To Advanc from Customer A/C Cr

(Being Cr balance transfer to Advance from customer A/C)

please let me know your opinion

Thanks

regards,shabbir

 

 

"

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