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a business owner has two shops A and B. He buys some items (for eg non inventory like stationaries in bulk) for 2000 and transfers items worth 750 to be used in shop B. What are the entries in shop A. Now shop B owes Shop A the amount of 750.
in shop A records
Dr stationaries expense 2000
Cr cash 2000
and regarding the transfer of items
Dr Receivables from B 750
Cr ????????
Cr NCA (stationary) 750
Dr receivable 750The double entry would relate to the SOFP. If there was profit or loss made on the sale, it would go to the I/S as well. If (A) sold all the stationary for £750, £250 would go to C.O.S as an expense. This would be reversed on consolidation (you will learn consolidation in F7).
Hope this helps.
Actually, if the items were expensed, then the entry would be
Dr: Receivable from B 750
Cr: Sales to B 750your entry would have only worked if the items were debited to non-current asset when purchased.
sorry I do not understand how there can be any profit if we speak ONLY ONE BUSINESS ENTITY though it has two own shops?
please explain
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