Accounting treatment of exp.

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This query is : Resolved

Rakesh Kumar Prajapat (Querist)

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)

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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