Partnership accounts

Profit and Loss Account Dr.

To License fees

but in the practice module it is given that 

prepaid license fee a/c  dr 1000

          to P & L adjustment a/c           1000

how and plz explain???

licencefee prepaid is for 6 months (1/4/2001 to 30/09/2001 - belongs to next year)

Amount of prepaid licencefee - Rs.1,000 which is an asset & not expenditure

At the time of payment of licencefee, entry passed in the books is

1. licencefee A/c...Rs.2,000

      To cashA/c....2,000

2. P&L A/c...Dr 2,000

   To licencefee....Cr 2,000

But now as this is a mistake, rectify the entry in P&L Adjustment account.

Prepaid licencefee A/c...Dt.Rs. 1,000 (Asset)

       To P&L Adj A/c.......Rs.1000 (Reverse the P&L A/c wrongly debited earlier)

Hope you understand

I understood....thanks a lot for solving my query.

Dear Naveena Sir

When at the time of paying license fee we know that part of it is related to next year, then can we pass the following entry at the time of payment of licensee fee

License Fee 1000

Prepaid License Fee 1000

To Cash 2000

Thanks

Shivani

Yes, we can pass at the time of payment itself...