Question

cost of a building is 2,50,000 and the expenditure made was 500,25000,5000 and the value of the building is 250000 then the expensed is

Answer 1

Initial expense is not a revenue expenditure, it is a capital expenditure.. so it is not recorded separately but capitalised to the asset....

In this case 500,25000,5000 are paid for meeting the capital expenditure building..

so these expenses are added to the cost of building..(take 250000 as the cost of building ; mode of payment is cash)

so 250000 + 5000+25000+500= 280500..is recorded in the books of accounting ..

The transaction affects two accounts... building a/c and Cash a/c (they are real accounts ; all assets and Liabilities come under Real account;cash and building are assets).

The Golden rule of accounting for Real account-

Debit What comes in, credit what goes out

Here building is comingin,so it should be debited..Cash is going out,so it should be credited...

The Journal Entry will be ..

building a/c Dr 280500

To Cash a/c. 280500

(Being building bought for cash)