Accounting treatment

This query is : Resolved

Mr.Doubt (Querist)
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25 October 2015 Dear Expert,

Our client (partisanship Firm)is in trading business for that business principle manufacturer ("PM") incurring some marketing and promotional expenses, these expenses.

In this promotion activity there is no out flow or in flow for our client, consultancy firm will incur all promotional expenses and they will inform the amount to our client at a point of time,inturn the same will inform by our client to principle manufacturer (PM) then PM will issue cheque to our client and after credit of that amount our client will issue cheque to the consultancy firm. here our client is just a middle man and not receiving/ paying any additional amount here.
Now, my query is can our client treat the amount received from PM as income? if so which kind of income it is??? and same amount will shown under business promotional expenses...or else what is the correct treatment for this transaction.

Note: PM is not having any capital/Investment in client business

CA Mehta Ankur N.

CA Mehta Ankur N. (Expert)
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25 October 2015 Its like Pm-Ur Firm-Consultancy Firm

Right ?

Now u need not treat it as expense or income.

You have to do adjustment entry only, expense for PM which is paid by your firm, so entry will be like this

In books of PM

1. Ur Firm A/c Debit t 5000
to Cash / Bank / Mode of payment

2. Expense Incurred at that time

Expense A/c debit
To That Consultancy Firm
3. When ur firm pay on behalf of PM

Consultancy Firm A/c Debit
to Your Firm A/c

In Your Firm

1. When PM Gives money to pay consultancy firm

Cash / Bank A/c Debit
to PM

2. When He pays to consultancy firm

PM A/c debit
To cash / bank

(On Behalf of PM paid to Consultancy firm)

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Mr.Doubt

Mr.Doubt (Querist)
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26 October 2015 Thank you for your prompt and efficient reply

CA Mehta Ankur N.

CA Mehta Ankur N. (Expert)
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26 October 2015 always welcome for any query if i can handle i will help.

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