Bina Belur (marketing) (33 Points)
17 February 2012Hi. I have a query. If I purchase goods on credit and my working capital is also on credit and I also make the sale on credit, where will the net profit in this case go in the balance sheet other than the net profit on the liabilities side? I cannot debit cash account as it is a credit sale. Will the owner's equity also increase witht eh net profit amount?
A learner
(Corporate Accounts )
(345 Points)
Replied 17 February 2012
Its lying in difference between your debtors and creditors..
in assets side Debtors will increase by the corresponding amount and will reflect there..
Thanks
" A learner"
Bina Belur
(marketing)
(33 Points)
Replied 17 February 2012
hi...i know account receivables will be debited.....but the net profit arising from 100% credit sale...can i add it to reserves and surplus or cash account? please let me know ...i am confused..
A learner
(Corporate Accounts )
(345 Points)
Replied 17 February 2012
Dear,
Whether sale is on cash basis or credit doesn't affect the accounting treatment.
Its a Profit sitting in your reserve & surplus( as a addition to reserves in current year) and as reflected by account receivables. Where is the question of cash ? Cash is not at all used.
Hope clarifies the issue...
Thanks
" A learner"
CAclubindia
