purchase accounting

A/c entries 577 views 3 replies

CA VINAY BANSAL

In job with KPMG

289 Points Joined January 2008

How will the goods in transit for which billing has been done and not received as on year end date accounted for in the balance sheet???

Replies (3)

Tehsinkhan Pathan

CA CMA DISA(ICAI) B.COM

3956 Points Joined November 2010

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

AVIJIT

CA FINALIST

370 Points Joined January 2011

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.

Rohtash

CA - Final / CS / B.Com

1140 Points Joined November 2009

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..

Agree with the said but there are cases when the bill is raised & sent to the purchaser prior to the deliver in that case there is a liability on u to pay & thus this would be the entry.

Goods In Transit A/c Dr

To Suppliers A/c Cr ( if the payment is not made)

or To Cash A/c Cr ( if the payment is made)