Advance Voucher Entry - How ?

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angel0in

n/a

34 Points Joined April 2009

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.

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Is there any method, pleaes tell me.

Thanks

Replies (3)

angel0in

n/a

34 Points Joined April 2009

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.

PRAVEEN KUMAR

MBA (Finance) B.Com.(P)

3443 Points Joined March 2007

Party entry was enough to keep track of each party a/c cash a/c dr. party a/c cr.

shabbir

ERP implementer

33 Points Joined March 2009

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