Interview question

If you have paid any advance to supplier, show it as Advance to supplier under Loans and Advances. In case no advance is paid entry for receipt of goods and creation of creditor only to be done once goods are received, i.e: 3rd April. No entry at the end of the year.

Sir

The entry shall be following(31.03)(on the basis of Invoice received)

 Purchase A/c dr  XXX

  To Creditor XXX

While material shall be reflected as Stock in Transit in Balance Sheet instead of St inTrade.

Originally posted by : CA Hardik
	Sir The entry shall be following(31.03)(on the basis of Invoice received)  Purchase A/c dr  XXX   To Creditor XXX While material shall be reflected as Stock in Transit in Balance Sheet instead of St inTrade.

agreed

If you have paid any advance to supplier, show it as Advance to supplier under Loans and Advances.

If you have received goods before 31st  then show in sundry creditor.

Exceptions:

Technically, goods in transit belong to the party holding legal ownership.  Ownership depends on the F.O.B. terms.  Goods sold F.O.B. destination do not belong to the purchaser until they arrive at their final destination.  Goods sold F.O.B. shipping point become property of the purchaser once shipped by the seller.  Therefore, when determining the amount of inventory owned at year end goods,  must be considered in light of the F.O.B. terms.  In the case of F.O.B. shipping point, for instance, a buyer would need to include as inventory the goods that are being transported but not yet received.  The diagram at right is meant to show who includes goods in transit, with ownership shifting at the F.O.B. point noted with a "flag."