If A purchase of goods from B with Excess amount? how to pass entry in books of account

Entry will be recored in books of accouts by the price of the goods. 

Accounting deals with the fact not what should be or not.

If A and B are indeed closed parties as supplier and customer relationship the following are the General Entries\\   Book of A as Customer                                                          If A has an overpayment on the purchase of goods   Entry should be   Debit - Purchases or Expenses Debit - Advances to Supplier B (Cash Paid less Value of Goods as per PO) Credit - Cash (total value paid)     Book of B as Supplier   Debit - Cash (total value received)   Credit - Sales (As per PO Value) Credit - Advances from Customer A (Cash - Sales Value)

 

 

If A purchase in A’s books DR nominal a/c or Asset a/c and CR THE Cash book or Bank book.

in B’s books DR Bank or Cash book and CR Sales or other income.

 

If “A” purchased goods from “B” with excess amount, how to pass an entry in the books of accounts?

The answers have been provided assuming that PO has been raised correctly but both expense booking and payment have gone wrong.

 

Credit purchases

(Frequent transactions and the amount is expected to be recovered from subsequent transactions)

Purchases/stock a/c Dr

  To creditor a/c

(Payable entry for purchase)

Creditor a/c Dr

  To Cash/bank a/c

(Payment entry for purchase)

Creditor a/c Dr

  To Purchase/stock a/c

(Recoverable entry - Upon discovering that the excess amount has been booked and paid)

Fair method to use even if the transactions are not frequent. This facilitates easy tracking.

 

 

Single time buyer and recovery of excess amount is possible

(Assuming that the transaction has not been routed through personal a/c and directly cash/bank a/c is credited considering the immateriality of the transaction)

 Purchases/stock a/c Dr

     To cash/bank a/c

(Payable entry for purchase)

Upon discovering that the excess amount has been booked and paid. If you don’t intend to open vendor (creditor) a/c in your books, Debit suspense a/c (current assets/liability group)

 

 

Creditor/suspense a/c Dr

  To Purchase/stock a/c

Only for concept. Not a fair method. Tracking becomes cumbersome like reconciliation of suspense a/c based on narrations and requires detailed drilling into ledgers

 

 

Single time buyer and no chance of recovering the excess amount paid

Purchases/stock a/c Dr

  To cash/bank a/c

(It goes to the debit of  purchases a/c or stock a/c and the credit would be given to cash/creditors a/c based on the nature of transaction)

 

(If you can’t recover or your intention is not to recover, it is just your purchase expense)

 

Note: If you find the excess paid amount is recoverable, it is wise to pass the recoverable entry with in the same FY as it would have effect on inventory valuation (i.e. Cost or NRV whichever is lower) if such purchase/stock is still unsold/not consumed at year end. If you don’t book recoverable entry, it results in less profit. This is because inventory is valued at NRV which would obviously be less than cost)

 

 

 

Thanks for invitation,

Following our colleagues answers.

purchase of goods from B- Entry of Jv

this issue by 2 kind of way. (if you're request the LPO-should be modified and it cash purchase it's doesn't issue)

 

1.Cash payment it's .

Inventory/purchase A/c Dr 

To Cash/ Bank Account Cr

(and Supplier issue the debit note at only excess amount)

 

2.Credit Payment Purchase 

Inventory/Purchase A/c Dr (total Purchase)

To supplier A/c (Advance/Excess) Cr

To Cash/ Bank A/c Cr (Payable Amount)

 

Sales of goods to A- Entry of Jv

1.Credit Payment Purchase 

Sales A/c Cr 

To Customer A/c (Advance/Excess) Dr (Issue the Debit Note)

 

To Cash/ Bank A/c Dr (Payable Amount)

the purchase in the debit side and for credit side we have two condition in the 

1- to suppliers if we take it by credit way.

2- cash or bank if we take it by advance payment.

Let me answer this question with some amount to better explain it.

Price of goods purchased from B = 1,000

Amount paid by A = 1,100

Excess amount paid by A = 100

 

Entry should look like this

                                                        Debit                 Credit

Inventory/Purchases                        1,000

Receivable from supplier B                  100

Cash/Bank                                                               1,100

 

This case should rarely happen because you have to make sure that the documents are there before payment. These documents will include invoice and purchase order.

 

Hope my answer satisfies your question.

 

 

In B books, the excess amount will be treated as advance from customer 

In A Books, the excess amount will be treated as advance to supplier 

Goods in Warehouse Dr. Supplier B Account

In the books of B, the excess amount will be treated as Advance from Customer (Current Liability)

In the books of A, the excess amount will be treated as Advance to Vendor (Current Asset)