Rectification of error-wages paid for installation of machinery.

Dear sir, i have seen a video of yours on youtube (rectification of errors) in which you mentioned about an error :wages incurred on installing a machinery and the journal entry you posted was machinary a/c debit wages a/c credit .and here i have a doubt that why is cash or a creditor not involved upon being the purchase of machinary

asked Apr 16, 2015 in Rectification of Errors by hussain (38 points) 4,016 views

1 Answer

0 votes
Dear Hussain, let me explain this with the help of an example:  A purchased a machinery for Rs.50000 on credit from M/s XYZ and spent Rs.1000 on its installation. A made following entries in his books:

Machine A/c       Dr.  50000

 To M/s XYZ A/c                      50000

Wages  A/c         Dr.   1000

  To Cash A/c                            1000

Amount paid as wages for installation of a machine is a capital expenditure and should have been debited to Machine A/c and not wages A/c.  So, the rectifying entry should be:

Machine A/c     Dr.     1000

  To Wages A/c                         1000

I hope I have made the point clear.  In case doubt persists, please don't hesitate to ask again.

answered Apr 16, 2015 by jbsclasses (3,971 points)
thankyou very much sir