Software: MoneyWorks accounting software
When ordering large quantity or high value of goods from supplier, often supplier requires you to place a deposit (or advance payment) before goods is being delivered or manufactured.
You need to create a non-stock item, Deposit, and associated this item with both Advances to Supplier (current Assets account) and Advances from Customer (current Liabilities account). Assuming you only deal with local suppliers and customers, then, both Advances accounts need to be associated with the standard rated GST code (G Code). According to IRAS, if deposit is form part of the payment, then, GST is applicable on payment made.
After creating your Purchase Order, process your order as Pay deposit for order, MoneyWorks will prompt you to record your payment information.
Assuming you paid a deposit of $10,000.00, a payment transaction will be added. The double entry for this transaction will be:
Debit Advance to Supplier account: 9,345.79
Credit Cheque Account (Bank): 10,000.00
Debit GST Paid account: 654.21
When Purchase Invoice received from your supplier, process your order again as Receive goods with invoice. The deposited value will be automatically less off from your purchase invoice as a negative line item after your last item purchased.
Assuming the value of your item purchased is at $20,000.00, the double entry for this transaction will be:
Debit Stock asset account: 20,000.00
Credit Advance to Supplier account: 9,345.79
Credit Accounts Payable: 11,400.00
Debit GST Paid account: 745.79
With MoneyWorks, it simplified your accounting entry.
Sameer, it’s correct. The remaining outstanding amount, accounts payable, is $11,400 (10,654.21 + 745.79 GST). Hence, 9,345.79 + 10,654.21 = 20,000.
is this capital exp.?
Not in this case.
Comments are closed.
this is wrong entry. As we have purchased $ 20,000 worth of stock from the supplier and only $ 9,345.79 has been settled and not with the whole amount. Remaining supplier account should be debited and credited to book the full invoice. In your entry only $ 9,345.79 invoice is booked out of $ 20,000