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Journal entry

07 May 2020

what is the journal entry for advance paid for a machine?why is advance for machinery account credited when machine is delivered?

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4 Replies

CA Kratanshu Gupta (Chartered accountant) (290 Points)
Replied 07 May 2020

While making payment for machinery as advance you had posted a entry like this
Advance for machinery A/c Dr
To Bank A/c

therefore when machine is delivered or received then the entry would be as follows-

Machinery A/c Dr
To Advance for machinery A/c

Query 2- since you had debited the advance for machinery account in first entry therefore to counter the entry you should credit the advance for machinery account as per second entry

I hope this would help to understand the concept otherwise you can connect or write anytime on my wall

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ATIF MOHAMMAD (6 Points)
Replied 07 May 2020

Thank you for telling the journal entries.What is the nature of "Advance for machinery account"?

ATIF MOHAMMAD (6 Points)
Replied 07 May 2020

how is accounting equation effected by giving advance for machinery?

Asha Kanta Sharma (Manager - Finance & Accounts) (36398 Points)
Replied 10 May 2020

Anything paid in advance is an ASSET for the business organisation. When you have given advance you have made an asset entry into your books of accounts and credited the cash/bank which got reduced in your books of accounts due to the payment made. Now when the actual material is received by you you need to debit the same and credit the earlier advance entry created temporarily to set off the and bring the balance to NIL for the earlier advance entry effected. Now only machinery will be shown as an asset in Financial Statements.