LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Krishanu Majumder (Accountant)     20 March 2013

Accounts entry

A manufacturing company produces flooring materials. Now if that company uses that materials for the development of its own floor, what will be the entry in accounts?



Learning

 12 Replies

Advocate Sastry (Advocate)     20 March 2013

Capitalization (Asset)  Dr

  To  Inventory a/c

1 Like

Krishanu Majumder (Accountant)     20 March 2013

Thank u sir. You mean to say I have to create a new ledger "Capitalisation" under assets and make it debited. Right sir?

Advocate Sastry (Advocate)     20 March 2013

Dear,

Just explain to me  one point... Where the flooring material has been used ? That become your fixed asset... The word capitalize means  you should debit the value to that asset head.

1 Like

Krishanu Majumder (Accountant)     20 March 2013

The material was used to make the floor of our factory and the work is done. The basic confusion is whether the debit side would be an "expense head" or "asset head" and what the exact debit-ledger is. The total value is nearly 1,00,000/-.

Advocate Sastry (Advocate)     20 March 2013

The debit side will be Asset head  since value of Factory is on Assets side

1 Like

Krishanu Majumder (Accountant)     20 March 2013

And in which name should I create the ledger?

Advocate Sastry (Advocate)     20 March 2013

You must have already opened the ledge account for your factory cost... Is  it not... The flooring cost will go into that... For furrther doubts send me Personal Message instaed of this Forum..

Krishanu Majumder (Accountant)     20 March 2013

I have PMed you, kindly get it sir.

Rama chary Rachakonda (Secunderabad/Highcourt practice watsapp no.9989324294 )     23 March 2013

Please follow journal entry. Debit   Factory building a/c and credit inventory a/c. Read accounts rules are to be follows. The rules are debit what comes in. and credit what goes out. Here the inventory coming into  building (asset) a/c. Therefore debit factory building a/c.  You are crediting the inventory a/c. since the material is going out from the inventory stock. It means one asset value is increasing and one asset vale us decreesing. Therefore double entry is over.

1 Like

girish nanji shejpal (self practising)     23 March 2013

Sir

     As answer by Shri Rama Chary Sir u have to take Entry in your Book of A/c

I total Agree with sir Answer & it is Corret Entry For your Company A/c

1 Like

Dr. M. C. Gupta (Associate Professor)     24 March 2013

The main question arises here that for what purpose the floring is used. For flooring- O. K. Now has it been used to repair the old floor, or a new bulding or a new portion of the building is coming up.? whether the earning capacity of the building is increased or the additional accomodation has been added?

If the flooring material is being used only as a part of the repairing process, The cost would be added to profit and Losss A/c treating it as revenue Expences, the entry would be as under.

Building maimtenance A/c/Profit And Loss a/c Dr.

To Inventory A/c                                                                  (A)

The cost would be added to profit and Losss A/c treating it as revenue Expences. The result would be the reduction of Profits and finally reduction in the TAX LIABILITY.

But if it is being used as cost of the new building than the entry shall be as follows:

Building A/c Dr.                                                                 (B)

To Inventory A/c      

The cost would be added to the value/Written down value of the ASSET being FACTORY BULDING thereby increasing the Depriciation which would be debited to P and L A/c. on yearly installment basis to be calculated on the written down value mathod.                                             

1 Like

VARUN MAHAJAN (Proprietor)     26 March 2013

According to Our India accounting standards we have to show our all the transaction should be clear

so in this case you have to first create a seprate ledger and transfer the stock to that ledger account then there after

Building Account Dr

Cr (That seprate acc created)


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  


Start a New Discussion Unreplied Threads


Popular Discussion


view more »




Post a Suggestion for LCI Team
Post a Legal Query