Compensation from debtor - Sales or Other Income?

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sushil (Querist)
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11 June 2011 Dear Experts,

We have charged one of our debtor towards compensation for cancellation of purchase order from him.

We have raised normal sales invoice for this.

My query is, whether this will be sales or other income?

Thanks,
Regards
Sushil.

Vivek Mehta (CA, DISA,CS, MBA)

Vivek Mehta (CA, DISA,CS, MBA) (Expert)
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11 June 2011 The income will be normal business income only...and rasing salesinvoice is wrong....you should have raised debit note for this....

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CA Suresh Jain

CA Suresh Jain (Expert)
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12 June 2011 There is no transfer of property in form of goods and therefore, it is not a sale. Mr. Vivek has said rightly that a debit not should have been raised. sureshjain.nj@gmail.com

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