JOURNAL ENTRY FOR MONTHLY PROVISIONS TO KNOW PROFIT OR LOSS

JOURNAL FOR MONTHLY PROVISIONS TO KNOW THE PROFIT OR LOSS

Here we are going to learn about monthly provision entry,and to pass the journal entry we have to arrange following data.

1. Closing stock value of Raw material, Work in progress and finished goods for the month end.
2. Salary payable.
3. Purchase of material
4. Other fixed expense payable.

• Printing and stationery
• Internet Charges
• Provident fund(employer contribution)
• ESI ( employer contribution)
• Travelling charges
• Conveyance
• Staff welfare
• AMC charges
• Power Charges
• Security Charges
• Transport Charges
• Professional Charges
• Interest and bank Charges

After getting above data we need to pass a compound journal entry consist of many accounts. This entry will be passed every month end.

Journal Entry for Provision expense

PARTICULAR		L/F NO	DEBIT AMOUNT	CREDIT AMOUNT
Purchase of Material	Dr		1000000
Salary and wages	Dr		400000
Printing and stationery	Dr		25000
Internet Charges	Dr		1000
Provident fund (employer                        contribution)	Dr		30000
ESI (employer contribution)	Dr		15000
Travelling charges	Dr		18000
Conveyance	Dr		12000
Staff welfare	Dr		1000
AMC charges	Dr		14000
Power Charges	Dr		6000
Security Charges	Dr		20000
Transport Charges	Dr		40000
Professional Charges	Dr		5000
Interest and bank Charges	Dr		22000
Closing Stock (asset)	Dr		150000
To Closing Stock (income)				150000
To Salary Payable				400000
To Other payables				1209000
Total			17,59,000	17,59,000

Rules for passing journal entry                     

In the above entry we assumed the other expenses as payable because the bills we are booked in the following month of existing month.

In the companies the closing stock entry will be passed by debiting the closing sock (asset) and crediting the closing stock (income) as we don’t prepare trading account in company as per Company Act Schedule III

The above provisional entry will be reversed in beginning of following month

                 

PARTICULAR		L/F NO	DEBIT AMOUNT	CREDIT AMOUNT
Closing Stock (income) Dr	Dr		150000
Salary Payable	Dr		400000
Other payables	Dr		1209000
To Purchase of Material				1000000
To Salary and wages				400000
To Printing and stationery				25000
To Internet Charges				1000
To Provident fund(employer contribution)				30000
To ESI (employer contribution)				15000
To Travelling charges				18000
To Conveyance				12000
To Staff welfare				1000
To AMC charges				14000
To Power Charges				6000
To Security Charges				20000
To Transport Charges				40000
To Professional Charges				5000
To Interest and bank Charges				22000
To Closing Stock (asset)				150000
TOTAL			17,59,000	17,59,000

Rules for passing journal entry                     

Every month at the beginning of the month the entry passed in previous month will be reversed. To cancel the provision provided in the books.