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14.1 Year-End Entries

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14.1 Year-End Entries

At the end of a financial year, a company needs to post various entries. These entries are yearly entries which are entered only once in a year and that too at the end of the financial year. In this topic, we will cover all such entries that are entered at the end of the financial year. For example, depreciation on fixed assets is charged at the end of the financial year. Similarly, entry for interest paid on loan is posted at the end of the financial year. In this section, we will try to cover all such entries that are posted at the end of the financial year.

Let us discuss posting of year-end entries one by one starting with the entry of depreciation charged on fixed assets.

Entry 1: Depreciation charged on fixed assets.

Star Electronics Company has charged depreciation of Rs. 30,000 on the Maruti Van that it used to deliver goods to the dealers. To post this entry, company will enter a Journal voucher and debit / credit the following accounts.

Debit: Depreciation A/c

30,000

Credit: Van A/c

30,000

Given here is a screenshot displaying Journal voucher entered for the depreciation charged on fixed asset.

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Figure 14.1 Journal Voucher – Add

Entry 2: Interest paid on loan taken from HDFC Bank.

Star Electronics Company has taken a loan of Rs. 10,00,000 from HDFC Bank on which interest of Rs.

80,000 has been paid throughout the year.

The Company will post the following entry in the Journal voucher:

Debit: Interest on Loan A/c

80,000

Credit: HDFC Loan A/c

80,000

Entry 3: Profit transferred to Partners account.

Star Electronics Company has accrued a profit of Rs. 8,00,000 in the year 2010-2011.

The Company will post the following entry in the Journal voucher:

Unit 14 – Year-end Process 279

Debit: Profit & Loss A/c

8,00,000

Credit: Capital A/c – Rajesh

4,00,000

Capital A/c – Ankit

2,00,000

Capital A/c – Amit

2,00,000

In the above entry, profit is divided according to capital invested by the partners in the firm.

In case of Proprietorship firm, the profit is transferred to Proprietor’s A/c.

Debit: Profit & Loss A/c

Credit: Proprietor’s A/c

In case of a company, profit is transferred to Reserves & Surplus account.

Debit: Profit & Loss A/c

Credit: Reserves & Surplus A/c

Entry 4: VAT Payment for the last quarter of the Year.

Apart from the entries explained above, one more entry that needs to be explained is of VAT payment of the last quarter of the year. Payment of VAT to the government for the last quarter of the year i.e. January–February-March is made in the month of April. It means that although the VAT is of the previous financial year but it is deposited in the current financial year. This entry needs to be reflected in the reports of the previous financial year as payment of VAT is for previous year only. In this section we will discuss the posting of such entry in BUSY.

Star Electronics Company has to Pay Rs. 20,000 as VAT for the quarter January-February-March of 2010-11 financial year. The company will post the following entry in the Payment voucher on 31st of March 2011:

Debit: VAT A/c

20,000

Credit: VAT Payable A/c

20,000

On saving the Payment voucher, a VAT Adjustment Details window appears (as VAT account is debited) in which details about the VAT payment such as Challan Number, Cheque Number are to be entered. Since the VAT amount is not yet deposited to the government, the company does not have these details on 31st of March. Hence, the company will leave this window blank on 31st March 2011.

When the company will deposit the VAT to the government i.e. at any time in the current financial year, then it has to do the following two steps:

1. Enter a Payment voucher with following entry:

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Debit: VAT Payable A/c

20,000

Credit: Bank A/c

20,000

2. Switch back to the previous financial year i.e. 2010-11 and open the Payment voucher entered on

31 st March in modify mode and enter the required details in VAT Adjustment Details window. For changing financial years, please refer to the next topic 14.2 Changing Financial Year.

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