Accounting entry

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When settling an amount at a reduced rate, the original expense booked in the P&L account needs adjustment. The difference between the original amount and the settled amount should not be treated as a discount directly impacting profit. Instead, the remaining balance should be recognised as indirect income, avoiding unnecessary tax on what would otherwise be considered income.

Nitin Daga

Nitin Daga (Querist)
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16 March 2020 if I settle a particular amojnt on 30% then what to do of remaining amount if I show as discount tgen it will be income and will have to pay tax then what to do in that condition then it does not effect profit and loss accoint

Eswar Reddy S

Eswar Reddy S (Expert)
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16 March 2020 If you have taken inward supply then you would have booked in profit & Loss Account as an expense.. Since the settlement is at reduced rate , the full amount can't be claimed as exp. So you must consider as income