Accounting Entries: Merchandise, VAT, Bills of Exchange, and More

Closing Balance of Merchandise and Changes in Inventories

• 300 Merchandise A | 880 | A, Value of merchandise at the end of this year
• 610 Changes in inventories of merchandise | 800 | E
• 300 Merchandise A | 80 | A, Value of merchandise at the end of last year

Company Buys Merchandise for €40,000 (Plus 21% VAT), on Credit

• 600 Merchandise purchased | 40,000.00 | A, Value of merchandise
• 472 Input VAT | 8,400.00 | A
• 400 Suppliers | 48,400.00 | L, Amount owed to suppliers

Sale of Merchandise, Customer Accepts Bill of Exchange

• 4310 Trade bills in portfolio | 48,400.00 | A, Amount the customer has to pay
• 700 Merchandise sold | 40,000.00 | R
• 477 Output VAT | 8,400.00 | L

Ask the Bank to Discount Bill of Exchange

• 572 Banks and financial institutions, demand current accounts, euros | 46,500.00 | A
• 5208 Payables, discounted trade bills | 46,500.00 | L, Amount the bank lent the company, the company has to return to the bank
• 4311 Discounted trade bills | 48,400.00 | A, Trade bills in portfolio that have been discounted
• 4310 Trade bills in portfolio | 48,400.00 | A

Customer Paid the Bill of Exchange, Bank Charges a Fee of €300

• 6653 Interest on bills discounted by other financial institutions | 1,900.00 | E, Percentage of the bill the bank keeps when discounting
• 5208 Payables, discounted trade bills | 1,900.00 | L, Amount we have to pay the bank for discounting
• 5208 Payables, discounted trade bills | 48,400.00 | L, Amount the bank lent us was paid by the customers
• 4311 Discounted trade bills | 48,400.00 | A, Trade bills in portfolio disappear
• 626 Banking and similar services | 300.00 | E, Amount the bank charges
• 572 Banks and financial institutions, demand current accounts, euros | 300.00 | A

Ask the Bank to Manage the Collection of the Bill of Exchange

• 4312 Trade bills in debt collection management | 66,550.00 | A, Trade bill, but the bank is in charge of it
• 4310 Trade bills in portfolio | 66,550.00 | A

Customer Does Not Pay Bill Managed by the Bank, Bank Charges Fee of €200

• 4315 Past due trade bills | 66,550.00 | Trade bills not paid by customers
• 4312 Trade bills in debt collection management | 66,550.00 | A, Trade bill, but the bank is in charge of it
• 626 Banking and similar services | 200.00 | E, Fee the bank charges
• 572 Banks and financial institutions, demand current accounts, euros | 200.00 | A

The Bank Reports the Collection of the Bill of Exchange Accepted by the Customer, Charging a Fee of €300

• 626 Banking and similar services | 300.00 | E, Amount the bank charges for managing the bill
• 572 Banks and financial institutions, demand current accounts, euros | 67,460.00 | A, Amount we receive
• 4312 Trade bills in debt collection management | 67,760.00 | A, Total amount of the bill

Regularization of Input and Output VAT (Settle Difference Between Input and Output VAT)

• 477 Output VAT | 19,950.00 | L
• 472 Input VAT | 12,600.00 | A
• 4750 VAT payable | 7,350.00 | L

Annual Depreciation of Buildings Amounts to €3,800

• 681 Depreciation of property, plant and equipment | 3,800.00 | E
• 2811 Accumulated depreciation of buildings | 3,800.00 | xA

Send Another Bill of Exchange €1,000 Higher (Plus 21% VAT) to Compensate for the Unpaid One. Customer Accepts

• 4310 Trade bills in portfolio | 67,760.00 | A
• 4315 Past due trade bills | 66,550.00 | A, Amount of the bills that the client did not pay
• 700 Merchandise sold | 1,000.00 | R, Extra charge for the additional management costs
• 477 Output VAT | 210.00 | L

Company Transfers Profit from the Previous Year to Voluntary Reserves

• 129 Profit/loss for the period | 53,100.00 | OE, Amount in opening balance
• 113 Voluntary reserves | 53,100.00 | OE

Pays by Bank Transfer €1,200 for an Insurance Policy to Cover Multiple Business Risks. Coverage is for 12 Months

• 625 Insurance premiums | 100.00 | E, Price of the first month
• 480 Prepaid expenses | 1,100.00 | A
• 572 Banks and financial institutions, demand current accounts, euros | 1,200.00 | A, Total amount of insurance

Company Buys on Credit 5 Containers for the Transport of Spare Parts, for €10,000 (Plus 21% VAT). We Can Return 2 of the 5 Containers (€4,000)

• 602 Other supplies purchased | 6,000.00 | E, 3/5 containers we can´t return
• 406 Containers and packaging returnable to suppliers | 4,000.00 | A, 2/5 containers we can return
• 472 Input VAT | 2,100.00 | A, VAT for the 5 containers
• 400 Suppliers | 12,100.00 | L, Total amount to pay suppliers

Company Returns One Container and Sells on Credit 2 Containers for €5,000 (Plus 21% VAT)

• 400 Suppliers | 2,420.00 | L, We decrease the amount we owe to suppliers
• 406 Containers and packaging returnable to suppliers | 2,000.00 | A, Worth of the container we return
• 472 Input VAT | 420.00 | A, Decrease the VAT of the container we return
• 430 Trade receivables | 6,050.00 | A, Amount the client has to pay us
• 704 Containers and packaging sold | 5,000.00 | R, Worth of the containers sold
• 477 Output VAT | 1,050.00 | L

Company Pays €10,000 to a Supplier, on Account of Future Purchases (21% VAT)

• 407 Advances to suppliers | 10,000.00 | A
• 472 Input VAT | 2,100.00 | A
• 572 Banks and financial institutions, demand current accounts, euros | 12,100.00 | A

Company Records Purchases of Merchandises for €4,000, Offsetting the Previous Advance Payment

• 600 Merchandise purchased | 4,000.00 | A
• 407 Advances to suppliers | 4,000.00 | A, Decrease the amount we advanced

Company Collects €15,000 from Customer Z, on Account of Future Sales

• 572 Banks and financial institutions, demand current accounts, euros | 18,150.00 | A
• 438 Advances from customers | 15,000.00 | A
• 477 Output VAT | 3,150.00 | L

Records the Payroll. Gross Salaries €10,000. Social Security on Account of the Company €800, of the Employees €500. Withholdings on Income Tax €1,100

Pay at Date Net Payroll to Employees. Social Security and Income Tax Withholdings Paid at the End of Next Month

• 640 Salaries and wages | 10,000.00 | E, Gross salaries
• 642 Social Security payable by the company | 800.00 | E, Social Security of the company
• 476 Social Security, payables | 1,300.00 | L, Social Security company + employees
• 4751 Taxation authorities, withholding tax | 1,100.00 | L, Withholdings on income tax
• 465 Salaries payable | 8,400.00 | L, Gross salaries – Social Security employees – withholdings on income tax
• 465 Salaries payable | 8,400.00 | L
• 572 Banks and financial institutions, demand current accounts, euros | 8,400.00 | A

Pays its Debt with the Social Security

• 476 Social Security, payables | 1,300.00 | L
• 572 Banks and financial institutions, demand current accounts, euros | 1,300.00 | A

Collects the Outstanding Trade Receivable from Sales in the Previous Year

• 572 Banks and financial institutions, demand current accounts, euros | 6,050.00 | A
• 430 Trade receivables | 6,050.00 | A

Buys Vans for €150,000 (Plus 21% VAT), Offsetting Previous Advance Payments and Paying the Rest on Cash

• 600 Merchandise purchased | 150,000.00 | A, Value of merchandise
• 472 Input VAT | 18,900.00 | A
• 407 Advances to suppliers | 60,000.00 | A, Amount in the opening balance
• 400 Suppliers | 108,900.00 | L
• 400 Suppliers | 108,900.00 | L
• 572 Banks and financial institutions, demand current accounts, euros | 108,900.00 | A

Buy a Car on Cash. Cost is €20,000 (Plus 21% VAT). Useful Life is 5 Years. Residual Value of €2,000. Declining Sum-of-Digits Method

• 218 Motor vehicles | 20,000.00 | A
• 472 Input VAT | 4,200.00 | A
• 523 Current payables to suppliers of fixed assets | 24,200.00 | L
• 523 Current payables to suppliers of fixed assets | 24,200.00 | L
• 572 Banks and financial institutions, demand current accounts, euros | 24,200.00 | A
• 681 Depreciation of property, plant and equipment | 3,000.00 | E
• 2818 Accumulated depreciation of motor vehicles | 3,000.00 | xA

Part of the Construction Shall be Dismantled at the End of Operations. Present Dismantling Cost Would Have Accounted for €6,000

At this Moment, Heavy’s Incremental Interest Rate for a 10 Year Borrowing is 5%

• 231 Buildings under construction | 6,000.00 | A
• 143 Provisions for dismantlement, removal or restoration of fixed assets | 6,000.00 | OE

Annual Depreciation of Property, Plant and Equipment. All the Buildings Useful Life 30 Years, No Residual Value, Depreciated Linear Method

• 681 Depreciation of property, plant and equipment | 4,533.33 | E, Depreciation calculated 136,000 (total amount of buildings) / 30
• 2811 Accumulated depreciation of buildings | 4,533.33 | A

Sells on Cash a Building with its Plot. Selling Price €10,000 (Plus 21% VAT). Carrying Amount Beginning of Period €6,000 (50% Land, 50% Building). Carrying Amount for the Building Broken Down into €4,000, Less €1,000 for Accumulated Depreciation (Up to the Beginning of the Period)

Useful Life Building was 30 Years. No Residual Value was Considered to Depreciate it, Under the Linear Method

• 681 Depreciation of property, plant and equipment | 88.89 | E, Depreciation in the year so far
• 2811 Accumulated depreciation of buildings | 88.89 | xA
• 543 Current loans for disposal of fixed assets | 12,100 | A
• 2811 Accumulated depreciation of buildings | 1,088.89 | xA, Accumulated depreciation + depreciation this year so far
• 210 Land and natural resources | 3,000 | A, Price of the plot
• 211 Buildings | 4,000 | A, Price of the building
• 477 Output VAT | 2,100 | L
• 771 Gains on property, plant and equipment | 4,088.89 | R, Profit we get
• 572 Banks and financial institutions, demand current accounts, euros | 12,100.00 | A
• 543 Current loans for disposal of fixed assets | 12,100.00 | A

On December 10, 2022, Purchase Merchandise to a Foreign Company for $1,200 Due 30 Days Later. On December 31, We Return Faulty Goods for $100. Exchange Rate: December 10, 2022: 0.96; December 31, 2022: 0.92; January 10, 2023: 0.94

• 600 Merchandise purchased | 1,152.00 € | E, 1,200 * 0.96
• 4004 Suppliers (foreign currency) | 1,152.00 € | L

December 31, 2022

• 4004 Suppliers (foreign currency) | 96.00 € | A, 100 * 0.96
• 6080 Returns of merchandise purchased | 96.00 € | E
• 4004 Suppliers (foreign currency) | 44 € | A, 1,100 * (0.96 – 0.92)
• 768 Exchange gains | 44 € |

January 10, 2023

• 4004 Suppliers (foreign currency) | 1,012 | L, 1,152 – 96 – 44
• 668 Exchange losses | 22 € | E, 1,200 * (0.94 – 0.92)
• 572 Banks and financial institutions, demand current accounts, euros | 1,034 | A, 1,100 * 0.94

Started to Build Premises in a Government Land for its Economic Exploitation During 10 Years

Up to the End of the Year, the Investment Accounts for €10,000 (Plus 21% VAT) in Materials, and €30,000 (Plus 21% VAT) in Services from Other Companies

The Work Time of the Company’s Employees has a Cost of €4,000

Heavy Borrows €20,000 a Long Term Loan from a Bank to Finance Part of the Investment

Interest Expense at the End of Period €400, Increasing Amount of the Debt, Since Heavy Did Not Reimbursed Any Amount from the Borrowing as Yet

The Construction is Due to Finish in 18 Months

• 231 Buildings under construction | 40,000.00 | A, Total investment 30,000 + 10,000
• 472 Input VAT | 8,400.00 | A
• 523 Current payables to suppliers of fixed assets | 48,400.00 | L
• 523 Current payables to suppliers of fixed assets | 48,400.00 | L
• 572 Banks and financial institutions, demand current accounts, euros | 48,400.00 | A
• 572 Banks and financial institutions, demand current accounts, euros | 20,000.00 | A
• 170 Non-current debt with financial institutions | 20,000.00 | L, Amount the bank lends us
• 662 Interest on payables | 400.00 | E, Interest the bank charges us
• 170 Non-current debt with financial institutions | 400.00 | L
• 231 Buildings under construction | 4,400.00 | A, 4,000 + 400
• 731 Work carried out by the company for property, plant and equipment | 4,400.00 | R

Company “A” Registers Sales of Goods for CU 1,050 (16% VAT Not Included), to Fall Due Within 12 Months. If Sales Would Have Been Cashed Down, Price Would Have Reduced to CU 1,000 (16% VAT Not Included)

• 430 Trade receivables | 1,168 | A
• 700 Sales of merchandise | 1,000 | R, Cashed down price
• 477 Output VAT | 168 | L

Amortized Cost of Trade Receivables at the End of the Reporting Period

• 430 Trade receivables | 50 | A, Register of sales – cashed down price
• 7621 Income from current loans | 50 | R, There is an implicit 5% rate of interest

Collection of the Trade Receivables (12 Months Later)

• 570 Cash | 1,218 | A, (1,000 + 168 + 50)
• 430 Trade receivables | 1,218 | A

Break Buys Raw Materials for €30,000 (Plus 21% VAT) on Credit. In Due Within 12 Months

Should Break Had Paid in Cash, Price Would Have Been €28,000 (Before VAT)

• 601 Raw materials purchased | 28,000 | E, Price in cash
• 472 Input VAT | 6,300 | A
• 400 Suppliers | 34,300 | L

12 Months Later

• 6622 Interest on payables, other related parties | 2,000 | E, Price of purchase – price in cash
• 400 Suppliers | 2,000 | L

Companies “A” and “B” Exchange Two Buildings

Property Given up by “A”

• Cost: 1,000,000.00
• Cumulative ​depreciation: 200,000.00
• Fair value: 1,500,000.00

Property Transferred by “B”

• Cost: 2,000,000.00
• Cumulative ​depreciation: 50,000.00
• Fair value: 2,100,000.00

* 50% of cost and fair value corresponds to the plot.

The terms of the exchange include a consideration in cash of CU 600,000 from “A” to “B”.

Company “A” Journal Ledger

• 220 Investments in land and natural resources | 1,050,000.00 | A, 50% of 2,100,000 (1,500,000 + 600,000)
• 221 Investments in buildings | 1,050,000.00 | A, 50% of 2,100,000 (1,500,000 + 600,000)
• 282 Accumulated depreciation of investment property | 200,000.00 | xA
• 220 Investments in land and natural resources (carrying amount) | 500,000.00 | A
• 221 Investments in buildings (carrying amount) | 500,000.00 | A
• 772 Gains on investment property | 700,000.00 | R, Difference
• 572 Banks and financial institutions, demand current accounts, euros | 600,000.00 | A

Company “B” Journal Ledger

• 210 Land and natural resources (fair value of the item received) | 750,000,00 | A, 50% of 1,500,000
• 211 Buildings (fair value of the item received) | 750,000,00 | A, 50% of 1,500,000
• 282 Accumulated depreciation of investment property | 50,000,00 | xA
• 572 Banks and financial institutions, demand current accounts, euros | 600,000,00 | A
• 220 Investments in land and natural resources (carrying amount) | 1,000,000,00 | A
• 221 Investments in buildings (carrying amount) | 1,000,000,00 | A
• 772 Gains on investment property | 150,000,00 | R