19 February 2009
freight of Raw material capitalise in Raw material....and the freight amount is not gone to purchase register....T.D.S is corrctly deducted now the valuation of closing stock is included the freight Amt..... whether this treatment is right???
19 February 2009
First see in the trading a/c that whether they have made any entry in freight inward a/c or not? If not than there may be chance that they had followed following practice. Normally many companies add the cost of freight into raw material in order to have better control over cost and profitability of the product and passed the foll. entry:
Goods / Purchase a/c Dr. 90 (incl. freight, excise, ST, custom, etc.) Freight inward clearing a/c Dr. 10 (provision for freight) To Provisional liability a/c 100 (Provisional for creditors)
You can see at the time of making GRN they credit the amt with a provisional acc. like Freight inward clearing as at the time of GRN exact amount of freight may not be known they normally reverse the same at the time of booking of invoice by debiting freight inward account and credit the freight inward clearing account. So first see whether they have reversed the same or not at the time of deduction of TDS if not than it is wrong and ask the same to auditee that why that had not debited the freight account as it is against the principal of materiality. Freight inward is a material item in the books of account.
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