Accounting & audit concepts

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

14 September 2015 Dear Experts,
Kindly consider the below example and give suggestion for Accounting as per Relevant Accounting Standards and others

A Company engaged in the business of Clearing & Forwarding. They raised an invoice to customers along with re-imbursement expenses in which they incurred while carrying out the work.

During the F.Y. 2014-15, they billed to customers an amount of Rs. 1,28,97,491/- in which, their service income is Rs. 38,91,411/- and re-imbursement charges collected is Rs. 90,06,080/-

Now the company wants to netted off the re-imbursement charges collected along with actual expenses.

In such a case, the turnover of the company only will be Rs. 38,91, 411/- i.e. their service income only.

Is it the correct method of accounting? Kindly Advise.

Note: Re-imbursement charges collected from customers is actual only and there is no margin or profit.

Amol S Joglekar

Amol S Joglekar (Expert)

14 September 2015 01. Consistency is one such principle which should be followed. In the instant case, if you want deviate from the consistency, you need to disclose the same along with its impact on profit.

02. Now the next logical poser is if at all the reimbursement is at actuals and contain no element of profit, why the same was included in the INVOICE? Assuming it was done erroneously and through over sight of law, a dislosure be made i the annual accounts that the practice of billing reimbursement expenses is hence forth dispensed off, however the last year the same has been included in INVOICE.

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