E T B Best PGDM Institute in Delhi PGDM Course in Delhi MBA AGU Best PGDM College in Delhi NCR Best MBA Colleges in Bangalore Best School in Noida Top Boarding School in Noida Top Boarding School in Delhi

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) 3,286 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