Question

Decide whether a booking must be made for the following business transactions and enter the account name and amount. The sales tax (VAT) may have to be taken into account with 18%. If no booking record has to be formed, please make this clear with "No booking record".

Info:

Elektrovolt A.Ş., an industrial company, produces sockets and mainly supplies them to Cereyan A.Ş., a trading company. Unless otherwise stated, create the posting records for the following business transactions as of December 31, 2019.

1. The managing director of Cereyan A.Ş. buys from Elektrovolt A.Ş. 5000 pieces of sockets each at 5 € (net) per piece on target. From the perspective of Cereyan A.Ş. to book?

2. In order to increase the production capacity, the board of Elektrovolt A.Ş. determined to buy bigger machines. Based on this, Elektrovolt A.Ş. at Parasever Bank A.Ş. for a loan in the amount of Advertised € 30 million. How is Elektrovolt A.Ş. to book?

3. The accounting department of Cereyan A.Ş. got an electricity bill. The date of the invoice is December 31, 2019 and the due date is January 10, 2020. The amount payable is € 1,000.

4. On December 27, 2019, two new employees joined Cereyan A.Ş. set. At Cereyan A.Ş. Salaries are paid on the last day of each month (The December salary at the end of December). The salaries of the newly hired employees are € 5,000 and € 2,500.

5. Elektrovolt A.Ş. received a letter from the tax office stating that the filing of the tax return for November 2019 is late and therefore a fine in the amount of € 10,000 is payable by the end of January 2020.

Answer 1

(All amounts are in Euro)

1) Cereyan needs to record the purchase transaction and pass below journal entry

Purchases (5,000 X 5) A/c Dr. 25,000

VAT Input (25,000 X 18%) A/c Dr. 4,500

To Elektrovolt A/c 29,500

(being purchase of 5000 sockets recorded)

2) No booking record. Because no monetary transaction has yet been done. Elektrovolt has only applied for the loan.

3) Cereyan needs to record the accrued charges for electricity bill and pass below journal entry

Electricity Expenses A/c Dr. 1,000

To Accrued Electricity Expenses A/c 1,000

(Being accrued electricity charges to be recorded)

4) No booking record. Cereyan records salary expense at the last day of the month. And both the employees must have received the salary before the year end i.e. 31 December 2019.

5) Elektrovolt should record the transaction as penalties and create an accrued liability for the year end

Penalties and Fines A/c Dr. 10,000

To liabilities for expenses A/c 10,000

(Being penalties and liabilities to be accrued for the year end)