Journal Entry for Receiving Advance from Ravi

1. Explanation of the Transaction:
- The business has received an advance amount of Rs 10,000 from Ravi.
- This advance is against an order of goods worth Rs 30,000 that Ravi has placed with the business.
- The advance is given by the customer to the business to secure the order and to show their commitment to purchase the goods.

2. Nature of the Transaction:
- The advance received from Ravi is a liability for the business.
- It represents an obligation to deliver the goods as per the order placed by the customer.
- Until the goods are delivered, the advance amount is considered as a liability and should be recorded in the books of accounts.

3. Journal Entry:
The journal entry for receiving the advance from Ravi against the order of goods will be as follows:

Debit | Credit
---------------------------------
Cash/Bank A/c | Rs 10,000
|
Advance Received from Ravi A/c | Rs 10,000

Explanation of the Journal Entry:

- The cash or bank account is debited with the amount of Rs 10,000 as the business has received the advance in the form of cash or bank transfer.
- The advance received from Ravi account is credited with the same amount of Rs 10,000 to record the liability created due to the advance received.

4. Impact on Financial Statements:
- The balance sheet will show an increase in the current liabilities section by Rs 10,000 under the head "Advance Received from Ravi."
- The cash or bank balance will increase by Rs 10,000 in the assets section of the balance sheet.
- The profit and loss statement will not be affected as it is a non-revenue transaction.

5. Conclusion:
- The journal entry for receiving an advance from Ravi against the order of goods is to debit the cash or bank account and credit the advance received from Ravi account.
- This entry records the liability created due to the advance received and increases the cash or bank balance of the business.