Accounting treatment

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 May 2013 insurance charges paid on purchase & it is not paid by company (purchasing company) what is accounting treatment for the above situation?

CA Sourabh Agarwal

CA Sourabh Agarwal (Expert)
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19 May 2013 "Paid on purchase" or "Not paid by company"..???

What is exactly the transaction ??

Querist : Anonymous

Querist : Anonymous (Querist)

20 May 2013 A company purchase the goods from other co. and the other co. paid the insurance charges on purchase. what is accounting treatment in the books of purchasing co.?????

CA Sourabh Agarwal

CA Sourabh Agarwal (Expert)
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20 May 2013 Does the purchasing company has any obligation to pay insurance cost. If yes, then charge it as cost of purchase, if no, then it is not your expense.

Querist : Anonymous

Querist : Anonymous (Querist)

22 May 2013 No obligation of purchasing co. to pay insurance cost.Is it correct to ignore from the purchase invoice.???

CA Sourabh Agarwal

CA Sourabh Agarwal (Expert)
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22 May 2013 I really do think that there is some misunderstanding between us.
If purchasing company is under no obligation to pay for it, then how come it is shown in invoice, it means that purchasing company has paid the total invoice amount (incl. insurance) to selling company.

And in such case, the insurance cost is debited to purchase cost of inventory.

Querist : Anonymous

Querist : Anonymous (Querist)

22 May 2013 Purchasing co. is not paying any insurance amount but it is shown in invoice issued by selling co.??

CA Sourabh Agarwal

CA Sourabh Agarwal (Expert)
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22 May 2013 That is something different. Still ignore it.

Guest

Guest (Expert)

22 May 2013 If it is including in Invoice and and purchasing company is paying the full amount of invoice.
directly or indirectly the insurance amount is covered under the payment mechanism, hence it is the expense purchasing company.

Correct me , if I am wrong

Querist : Anonymous

Querist : Anonymous (Querist)

29 May 2013 you are correct.