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what is the different between these two important transactions?

selling good worth rupees 5000 to Ram on credit/on account :

                                            Dr            Cr

1) Ram a/c 5000
sales a/c 5000

2) account receivable a/c 5000
sales a/c 5000

asked Nov 3, 2014 in Terminology in Accounts by rahimdad (60 points) 141 views

1 Answer

0 votes
There is no difference as such in selling on credit or 'on account'.  Actually 'on account' means the goods are regularly supplied and the debtor keeps on making payment, not necessary matching be invoices.  This is a kind of running account.  For example goods are supplied for Rs.5000 and payment is received for Rs.4000.  Again goods are supplied for Rs.6000 and payment is received for Rs.3000.  This system goes on and at the end of the accounting period, final figures are confirmed by both the parties.  Normally in such cases an upper limit is fixed for the debtor by the supplier.  He does not allow the debtor to avail credit after some that limit.
answered Nov 3, 2014 by jbsclasses (3,971 points)
then which of these two transactions is right?
First one:  Ram A/c   Dr.         5000

                   To Sales A/c                  5000

In this case you need to debit an individual Ram's A/c.  Accounts receivable is a collective account of all debtors.  While preparing Balance Sheet the total of al the debtors is called Accounts Receivable.  So whomsoever goods are supplied on credit only that party should be debited.
that really cleared to me  
may allah hand and blessing be always with you and your family sir
Thank you so much.
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