The journal entry for asset purchase is- Particulars Amount Amount Asset A/c Dr $$$ To Bank A/c $$$ According to the Modern Approach for Assets Account: When there is an increase in the Asset, it is ‘Debited’. When there is a decreaseRead more
The journal entry for asset purchase is-
| Particulars | Amount | Amount |
| Asset A/c Dr | $$$ | |
| To Bank A/c | $$$ |
According to the Modern Approach for Assets Account:
- When there is an increase in the Asset, it is ‘Debited’.
- When there is a decrease in the Asset, it is ‘Credited’.
So the journal entry here is about the purchase of an asset and since there is an increase in Asset, the assets account will be debited as per the modern rule and due to the decrease of cash in the bank account, it will be credited.
For Example, Richard purchased furniture worth Rs 6,000 for his business.
I will try to explain it with the help of steps.
Step 1: To identify the account heads.
In this transaction, two accounts are involved, i.e. Furniture A/c and Bank A/c as Richard has acquired the furniture paying a certain amount.
Step 2: To Classify the account heads.
According to the modern approach: Furniture A/c is an Asset account and Bank A/c is also an Asset account.
According to the traditional approach: Furniture A/c is a Real account and Bank A/c is also a Real account.
Step 3: Application of Rules for Debit and Credit:
According to the modern approach: As asset increases because Furniture has been bought, ‘Furniture A/c’ will be debited. (Rule – increase in Asset is debited).
Bank account is also an Asset account. As the asset is in the form of cash decreases because the amount has been paid by cash or cheque, Bank account will be credited. (Rule – decrease in Asset is credited).
According to the traditional approach: Furniture A/c is a Real account and Bank is also a Real account, for which the rule to be applied is ‘Debit what comes in and Credit what goes out’. Furniture being asset comes in the business, so Furniture A/c will be debited and as cash goes out Bank A/c will be credited.
So from the above explanation, the Journal Entry will be-
| Particulars | Amount | Amount |
| Furniture A/c Dr | 6,000 | |
| To Bank A/c | 6,000 |
See less
A Consignment Account is a Nominal Account. It is classified as a nominal A/c because it is prepared to ascertain the profit earned or loss incurred on the consignment. The accounting rule applied to consignment A/c: Debit all Expenses & Losses and Credit all Incomes & Gains. As per the modeRead more
A Consignment Account is a Nominal Account. It is classified as a nominal A/c because it is prepared to ascertain the profit earned or loss incurred on the consignment.
The accounting rule applied to consignment A/c: Debit all Expenses & Losses and Credit all Incomes & Gains.
As per the modern rules, there is no clear-cut classification of consignment A/c. It is prepared from the perspective of the consignor, hence it cannot be outrightly classified as an expense/revenue.
In the context of accounting, consignment refers to an arrangement of goods wherein the consignor sends the goods to the consignee so that the consignee can sell/distribute the goods on behalf of the consignor.
The relationship between the consignor and consignee is that of a principal and agent. The consignee gets a commission for his services.
You should keep in mind that the consignee does not get ownership of the goods even though the goods are in his possession. The ownership remains with the consignor till the sale is made. On sale, the buyer will become the owner.
A Consignment A/c is an account prepared to record the transactions happening in a consignment business. This account is maintained by the consignor. It shows the profit earned or loss incurred by the consignor on a specific consignment.
A consignor may send goods to more than one consignee. In such a case, a separate consignment A/c is prepared for each consignment.
The following items appear on the debit side of the consignment A/c:
The entries appearing on the credit side of the consignment A/c are as follows:
The balance in the consignment A/c represents the profit or loss made on the consignment. It is transferred to the P&L A/c and the account is closed.
Below is the format for Consignment A/c:
See less