12 January 2008
What is the purpose achieved by asking client to reconcile his sales turnover reported in excise returns for the entire financial year with the turnover reported in the financials(i.e. Profit and loss A/c)? Basically i wanted to know why is a client asked to prepare reconciliation statement of excise with financials. According to me sales turnover reported in financials should reconcile with his sales tax returns because Excise duty is payable on production stage.
14 January 2008
Dear Ashish you need to understand the distinction between levying and collection of excise duty.In excise the duty is being levied at the time of manufature of the goods while for administrative convinience the collection of duty is made at the time of its removal from the factory gate.Now understand that whatever goods will be moving out of the factory would be either for sale or storage or jobwork etc.And under excise law,there are different provisions which provide tratment for Job work and storage etc.What left behind is the sale of goods.Now this is the reason that whatever is shown in the excise returns signifies that the manufacturer has removed its goods for sale.Now the purpose of making reconcillation between sales as per financial statements and as per excise return is that whether the two are in line with each other because organisations tries to inflate its Sales turnover in financials, which results in window dressing.Also you can make the reconcillation with Sales Tax returns also.But remember sales as shown in all three statemnts viz. financials,excise returns and Sales Tax returns must be the same and if you find any difference in these ,try to reconcile it.
CAclubindia
