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How to record transaction for advances from customers, sale and showing debtors in BS

A/c entries 149 views 1 replies

ravali

intermediate

38 Points Joined December 2011

Our company comes under works contract services where goods are the major portion. My query relates to entries relating to sales. Actually when a contract is initiated with the customer, we are debiting the customer and crediting the Project Fixed amount(created in Assets side). So everytime when we receive advance, cash and customer a/c are being debited and credited respectively. Please help me regarding posting of sale entries. Is there any better idea for these type of transactions??

Replies (1)

Rama chary Rachakonda

Master in Accounts & high court Advocate

8883 Points Joined December 2011

You're seeking guidance on accounting entries for sales in a works contract services company. Currently, you're debiting the customer and crediting the Project Fixed amount (an asset account) when a contract is initiated. Then, when receiving advances, you're debiting cash and customer account, and crediting the respective accounts. For sales entries, consider the following: 1. _Recognize revenue_: Debit the Customer Account and credit the Sales Account (Revenue) when the sales transaction occurs. 2. _Use a Work-in-Progress (WIP) account_: Instead of crediting the Project Fixed amount, use a WIP account to track the progress of the project. This will help you match the revenue recognized with the expenses incurred. 3. _Record expenses_: Debit the respective expense accounts (e.g., Materials, Labor, Overheads) and credit the WIP account as expenses are incurred. 4. _Match revenue and expenses_: When the project is complete, match the revenue recognized with the expenses incurred (from the WIP account) to determine the profit or loss. 5. _Consider using a project accounting software_: This can help streamline your accounting processes and provide better project visibility.

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