LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Bank gaurantee for contarctor journal entry

sayad (Executive) (179 Points)

11 April 2022

could some one help me with journal entry and howto carry forward balance for new FY

i have some bank gaurantee with bank which was issued in favaour of the party for the contacting work given to us

Reply
Follow
Share

5 Replies

sayad (Executive) (179 Points)
Replied 11 July 2022

Pls help

what will be entry if i take bank guarantee with 20 % margin from bank and also what will be entry if i take bank overdraft

Yasaswi Gomes new (Finance ) (4469 Points)
Replied 11 July 2022

By Bank Guarantee a/c

To Bank a/c

this is an asset and must be recognised as the bank guarantee could be in the form of an FD.

Any commission charges incurred

By Commission expenses a/c

To Bank A/c

If you complete the contract work and the FD will be returned to you and you can liquidate it

By Bank a/c

To Bank Guarantee a/c

If you cannot complete the work, then the FD will be impounded by the government

By Contract Loss a/c - P&L

By Bank Guarantee- SOFP

Now there is a need to create provision incase if your past experiences have bad remarks like onerous contracts. Here i think the possibility is remote and it is not required to disclose it in the statements as well.

Coming to your first question, when you close the ledger at the year end, the balance C/F will always be on the same side of the Dr or Cr column where the account is. Eg. Machinery account is an asset and a debit account/real account-

Debit The Receiver, Credit The Giver This principle is used in the case of personal accounts. ...
Debit What Comes In, Credit What Goes Out This principle is applied in case of real accounts. ...
Debit All Expenses And Losses, Credit All Incomes And Gains This rule is applied when the account in question is a nominal account

In the books of machinery being debit balance, usually the debit column will hold the C/F balance. This means debit balance, asset is carried forward to the next year. I couldnt find online examples for this.

If you want to carry forward balances, do it for all and add them up. It will give you the same debit and credit balance. I have attached a screenshot. Usually ledgers are closed.

Attached File : 3176554 20220711213141 oip.jpg downloaded: 53 times

Yasaswi Gomes new (Finance ) (4469 Points)
Replied 11 July 2022

It was a long time since I've worked on ledgers, while closing the ledgers like I have attached the screenshots, C/F in my terminology = B/D here. for some reason it is not attaching. Try google or bing images 'general ledger b/d accounting'