Let's go through how to record a fuel expense in accounting. We'll consider various scenarios such as paying for fuel in cash, on credit, or using a company credit card.
Example 1: Fuel Expense Paid in Cash
Scenario: ABC Pvt Ltd pays ₹5,000 in cash for fuel for its delivery vehicles.
Journal Entry:
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Fuel Expense A/c | 5,000 | |
| To Cash A/c | 5,000 | |
| (Being fuel expense paid in cash) |
Explanation:
- Fuel Expense A/c is debited to recognize the fuel expense.
- Cash A/c is credited to reflect the cash outflow for the payment.
Example 2: Fuel Expense on Credit
Scenario: ABC Pvt Ltd buys fuel on credit for ₹7,000 from a fuel station.
Journal Entry:
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Fuel Expense A/c | 7,000 | |
| To Accounts Payable A/c | 7,000 | |
| (Being fuel expense incurred on credit) |
Explanation:
- Fuel Expense A/c is debited to recognize the fuel expense.
- Accounts Payable A/c is credited to record the liability to the fuel station.
Example 3: Fuel Expense Paid Using Company Credit Card
Scenario: ABC Pvt Ltd pays ₹3,500 for fuel using the company credit card.
Journal Entry:
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Fuel Expense A/c | 3,500 | |
| To Credit Card Payable A/c | 3,500 | |
| (Being fuel expense paid using company credit card) |
Explanation:
- Fuel Expense A/c is debited to recognize the fuel expense.
- Credit Card Payable A/c is credited to reflect the liability to the credit card company.
Example 4: Payment of Credit Card Bill
Scenario: ABC Pvt Ltd pays the credit card bill which includes the ₹3,500 fuel expense.
Journal Entry:
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Credit Card Payable A/c | 3,500 | |
| To Cash/Bank A/c | 3,500 | |
| (Being payment of credit card bill) |
Explanation:
- Credit Card Payable A/c is debited to eliminate the liability.
- Cash/Bank A/c is credited to reflect the cash outflow for the payment.
