purchase accounting

GOODS IN TRANSIT A/C DR............

                   TO CASH/CREDITORS A/C

THEN IF GOODS RECIEVED..............

PURCHASE A/C DR.......................

                TO GOODS IN TRANSIT A/C
 

I dont agree with Tehsinkhan.. As if you do this your balance will not match with the creditor and the Cash cannot be credited in any way because there is no outflow of Cash if goods are in Transit.

So when bill is raised (Cash paid):

Purchase A/c Dr

To Creditor A/c (Cash A/c)

On the date of Balance Sheet just add the value of stock in your Closing Stock or show separately as Goods in Transit in both Trading A/c and Balance Sheet.

I dont agree with Tehsinkhan.. As if you do this your balance will not match with the creditor and the Cash cannot be credited in any way because there is no outflow of Cash if goods are in Transit.

So when bill is raised (Cash paid):

Purchase A/c Dr

To Creditor A/c (Cash A/c)

On the date of Balance Sheet just add the value of stock in your Closing Stock or show separately as Goods in Transit in both Trading A/c and Balance Sheet..