Question

placed an order with Rakesh Mohan for the supply of goods of the list price of ₹ 100000.In this connection raman paid 10% of the least price as an advanced by cheque

Answer 1

Given that "placed an order with Rakesh Mohan for the supply of goods of the list price of ₹ 100000.In this connection raman paid 10% of the least price as an advanced by cheque"

List price = 100000

Advance payment= 10% i.e, 10000

so remaining 90% will be on credit....

This transaction affects 2 accounts... Amount paid in advance a/c .. because amount was paid in advance...(and) Bank a/c.. because paid through Cheque.. (these are real accounts; all assets and Liabilities come under Real account; advance payment ,bank balance are assets) ,

the golden rule of accounting for Real account is

Debit What comes in, credit what goes out

Paid in advance a/c is coming in (in the form of asset) so it should be debited... Cash from Bank a/c is going out so it should be credited...

So the journal entry will be....

Paid in advance a/c Dr 10000

To Bank a/c. 10000

(Being advance paid through cheque)


later when the order becomes successful. then the entry will be (assuming to be on cash/ Credit)..

purchases a/c Dr 100000

To Paid in advance a/c. 10000

To Cash /Raman a/c. 90000

(Being Goods purchased)....