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Accounting entries

Chandra Shekhara .B (Finance Professional) (53 Points)

14 May 2013

Dear Friends

M Working in a service providing company,

1. We have booked service Invoice of 1,20,000 on 1/4/2013

2. We received 1,20,000.00 on 10/5/2013

3. The Serive is for the period of 1/4/2013 to 31/3/2014

How to pass the month end entris, please help me out, Your reply is highly appreciated.

Thanks and Regards

Chandru.

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6 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 14 May 2013

Following are the entries to be passed :-

Trade Receivable / Customer A/c Dr. 120000

To Income from service A/c 106800

To Service Tax Collected A/c 13200

( Being Invoice for service provided booked )

Bank A/c Dr. 120000

To Trade Receivable / Customer A/c 120000

( Being payment received from customer )

Regards,

Devendra Kulkarni

Anupama Abhijit Pathak (Student) (49 Points)
Replied 14 May 2013

As per AS-9-Revenue recognition

" Revenue from service transactions is usually recognised as the service is performed, either by the proportionate completion method or by the completed service contract method"

accordignly, for the particular month as per adopted method whatever extra sale you booked you have to reverse it by -

sale a/c dr XXXX

sale in advance (current liab) Cr XXXX

your party account will not have any impact of your monthly closer entries. so it will get NIL when you receives payment in the month of May.

CA rohit swami (CHARTERED ACCOUNTANT) (262 Points)
Replied 14 May 2013

ACCOUNTING ENTRYIES AS PER DEVENDRA ARE CORRECT, SO NOW SERVICE TAX DEPOSIT ENTRIES ARE REQUIRED WHICH LAST DATE IS 5TH OF EVERY NEXT MONTH IF YOU ARE I COMPANY ASSESSEE.

SERVICE TAX COLLECTED A/C DR.

TO BANK/ CASH

(BEING SERVICE TAX DEPOSIT THROUGH CASH/BANK)

CMA RAVI (ASSISTANT MANGER - FINANCE) (478 Points)
Replied 14 May 2013

AGREED WITH DEVENDRA'S ANSWER...

Anupama Abhijit Pathak (Student) (49 Points)
Replied 14 May 2013

I think ....

Entries suggested by Devendra are already booked by Chandrashekhar.

Now his query is , How that entire booked sale will reflect in monthly closed financial statements?

I.e the entire sale is not for the one month for which he wants to closed the books.So it should be shown?

Deena.Vanan (Grad. CWA, ACA, CS(F)) (120 Points)
Replied 16 May 2013

Para 7.1 of AS-9 states that, Revenue from service transactions is usually recognised as the service is performed , either by the proportionate completion method or by the completed service contract method.

Thus at the time of raising the invoices you cannot take the entire amount as your service income rather you should recognise it only on the proportionate basis.

At the time of invoice booking

Customer A/c Dr 1,20,000

To Deferred Income A/c (Liability) 1,06,800

To Service tax payable A/c 13,200

Month End closure entry

Deferred Income A/c (Liability) Dr 8,900 (1,06,800/12)

To Service Income A/c Cr 8,900

At the time of ST payable

Service tax A/c Dr 13,200

To Bank A/c 13,200

At the time of receipt of cash

Bank A/c Dr 1,20,000