Account cash backs to customers

Accounting Entries 492 views 2 replies

Abiz

Partner

25 Points Posted on 10 June 2014

Hello Experts,

We are a small partnership firm with decent sales and very less overheads. We are primarily involved in sales and we have lot of requests from our customers to pass on the benfit to them.

We get a commission of 2% for each sale and customers expect 1% back for buying through us. This is a win-win situation for everyone including the seller.

I'm wondering on what would be the best practice to account this outgoing cash flow to the customer. How would TDS work in this scenario and should we treat the customer as a contractor or anything else.. or are there other ways to handle this scenario.

Your expert advice is highly appreciated.

Thank you for your valuable time.

Abiz

Replies (2)

PRADEEP S

Finance Manager(B.Com. M.Com. M.Phil. LL

216 Points Posted on 11 June 2014

Hi, The simplest and uncomplicated way out is to reduce the Sales price for all future sales. And for already made Sales, issue Cash Discount, no question of TDS for passing Cash Discount through Credit Notes.

Regards Pradeep S

Abiz

Partner

25 Points Posted on 11 June 2014

Thank you for the response Pradeep.

We do not hold stock / inventory of the product and we are not supposed to reduce the sales price per our agreeement with the seller. Say the cost of product is 50,000, we can negotiate a price for the customer to 45000. We get paid 2% of 45K and in which we 1% of 45K goes to the customer who bought the product.

I hope I've stated it clear