Accounting treatment of exp.

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Rakesh Kumar Prajapat (Querist)
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16 December 2014 H'nable Sir & Dear Friends,

I want to know about accounting treatment of octroi & freight Expenses (O & F Exp.) on following cases :

1. Expense paid by us on Purchase of Goods & such expenses added in Purchase Invoice.
:- Can I consider as direct exp. or Including in Purchase amount?

2. Whenever Goods sold to Debtors, issue Sales Invoice & in such invoice added O & F Expenses which was paid by Debtors.
:- such exp. include either in sales A/c or less from O & F Exp.(which showing in P&L A/c)

Note:- Not levy VAT on O & F Exp. in both case Goods Purchase & Sales.

What if VAT levied on O & F Exp., in this case your suggestion will changes.

Amol S Joglekar

Amol S Joglekar (Expert)
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16 December 2014 01. If the Octroi and Freight are included in Purchase Invoice, it will go to Purchase Account.
02. For sales, use CONSERVATIVE principle.
Say INR 100 sale price + Octroi 2 + VAT 5(On 100)=107
Debit Customer A/c 107
Credit Sales 100
Credit Octroi Receivable 2
Credit Vat Collected 5

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