When we pass such entry

Cash of Rs.10000 paid to a debtor and Expense viz commission and freight paid on behalf of debtor and recoverable from him.

how can u pay to a debtor.. ??

 

 

I agree with Chintz. He has given correct situation. Basically its a combination of a Journal entry and a payment entry.

chintan mehta is right. how can we pay to a debtor?I think chintz doesn't know the meaning of debtor...???????

      CA. tarun maheshwari explain How its a combination of a Journal entry and a payment entry....??????

This case becomes simple if you frame the entry creating the debtor. When a sale is made and there is an agreement between the both the parties on recovering the expenses relating to the sale, the entry would be sales a/c dr 10000 expenses a/c dr 2000 to debtor a/c 12000 now that when the the amount is recovered, the entry would be debtors a/c dr 12000 to cash a/c 2000 to expenses a/c 10000 these entries are generally found in medical stores where the margin of sale is not defined and the debtors are liable to pay the expenses relating to the sale. In short, you are recovering the expenses to the same head of account and netting of the expenses instead of showing showing it as gross amount as expenses recovered in the trail balance.

I think after the expanation given my Abhinav so nicely, I dont need to explain the same thing again.

Originally posted by :Abhinav Jain
"	This case becomes simple if you frame the entry creating the debtor. When a sale is made and there is an agreement between the both the parties on recovering the expenses relating to the sale, the entry would be sales a/c dr 10000 expenses a/c dr 2000 to debtor a/c 12000 now that when the the amount is recovered, the entry would be debtors a/c dr 12000 to cash a/c 2000 to expenses a/c 10000 these entries are generally found in medical stores where the margin of sale is not defined and the debtors are liable to pay the expenses relating to the sale. In short, you are recovering the expenses to the same head of account and netting of the expenses instead of showing showing it as gross amount as expenses recovered in the trail balance.	"

How could youi pass such a entry

sales dr..

exp dr..

to drs..

 

when the sales ismade

 

This case could also be considered as advanced given by debtor refunded....and the expenses relating to sales transaction made earlier are recovered from the debtor......

 

it is a combination of payment and  journal entry

 

Suppose,

Mr A, a debtor of a company C pvt ltd has given advance of Rs. 20,000 for purchasing some item. and later on C pvt ltd only supllied gods of Rs. 8,000 and the expenses relating to supllying of these goods were Commission Rs. 1,000 and freight Rs.1,000. Further, supose the debtors has undergone an agreement under which exps relating to suplly of goods is to be paid by the debtor itself

 

Now

 

In The Boks of C pvt ltd.

Journal

Cash A/c  Dr. 20,000

  To Mr. A (Debtor) A/c 20,000

(advanced received from mr A)

----------------------------------------------

Mr A (Debtor) A/c Dr. 8,000

Commision A/c   Dr. 1,000

Freight A/c            Dr. 1,000

  To Sales A/c                         8,000

  To Cash A/c                          2,000

(sales made to Mr A; expenses incurred on suplly of goods are paid in cash which are recoverable from Mr A)

-------------------------------------------------

Mr. A  (Debtor) A/c    Dr. 12,000

   To Cash A/c                               10,000

   To Commission A/c                    1,000

   To Freight A/c                                1,000

(Advanced received from Mr A refunded; expenses incurred on supply of goods to Mr A are recovered and the balnce is paid back in cash)   

-------------------------------------------------------------  

 

example of medical shop given by Mr Abhinav is correct!

 

 Yes Abhinav Jain  is Right

no. i do not agree with explanation given by abhinav jain.

he should give clear narration of the journal entry passed by him.

mr. tarun, i think you are right, but am also surprised how u agreed with abhinav jain

Can we modify the entries given by Mr Anuraag Sharma  like this 
 

 

Mr A (Debtor) A/c Dr. 10,000.00

  To Sales A/c                         8,000 (Sales made)

  To Cash A/c                          2,000 (Commision & Freight paid on behalf of Mr. A)

and

Mr. A  (Debtor) A/c    Dr. 10,000

   To Cash A/c                               10,000

(Being balance advance refunded to Mr. A)

Is it necessary to Dr. Commission & Freight A/c at the time of sales ??

Please clarify.......

Regards

 

hi neha,

in ur case,10,000 r paid to debtor as refund or for any other reason whatever it may be and remaining 2000 r commission & freight paid on behalf of debtor.

And one correction in entry given by vijay d that freight & commission should be credited instead of crediting cash a/c for rs.2000 because u r paying on behalf of debtor and that amount u have already deducted from rs.20000 while refunding.

Hi Monika,

Can you please clarify why commission & freight a/c should be debited ? Do you want to treat these as your own business expenses & want to show in your P&L?

Entry given by Mr Anuraag Sharma is absolutly correct & I just wanted to know that can we short this entry by debiting vendor instead of debiting commission & freight a/c because these are not our business expenses & recoverable from the debtor.

I hope I am clear now.............

Regards

Hi Vijay D

m not saying that freight or commission should be debited.

m saying that freight & commission should be written instead of cash a/c for 2000 in credit side in ur first entry.

 hello to all

for posting ur replies thax a lottt

but

truly speaking i m totally confused by this

plzzzz it will be better if it is explained in detailed starting from what a situation may be

plzzzz

but 

soon

its urgent