Cost of inventory
This query is : Resolved
Garima.soni
(Querist)
19 May 2016
An Indian company buys software from a company is US only on getting orders from customers in India. Basically they are reselling the software in India after adding a mark up.
Now the situation is - Based on the previous year business the Indian company is entitled to a corporate credit of 5% which they can utilize in the next year. The Indian company also incurs selling expenses (participating in exhibitions for marketing the software) on behalf of the US company. So the US company issues credit note to the Indian company. My question is does this corporate credit which is given by the Company in US should be deducted from the cost of the software or should be treated as discount received from suppliers and accounted as Other Income?
Now the situation is - Based on the previous year business the Indian company is entitled to a corporate credit of 5% which they can utilize in the next year. The Indian company also incurs selling expenses (participating in exhibitions for marketing the software) on behalf of the US company. So the US company issues credit note to the Indian company. My question is does this corporate credit which is given by the Company in US should be deducted from the cost of the software or should be treated as discount received from suppliers and accounted as Other Income?
Amol S Joglekar
(Expert)
19 May 2016
when such a CREDIT is turnover based as per the pre decided norms, then one may think of reducing the same from the cost. In the present case it should be accounted for as discount received.
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