Accounting Entry for Fine and Penalty

If a Manufacturing Co. deduct fine against Party for Safety Expense for Violation of Safety Rules then what will be the accounting treatment ? As we enter Expenses entry as follows :

Safety Expense A/c ......................... Dr.

          To Party A/c

but during deduction of amount for Violation of Safety Rules entry will be as follows or not ?

Party A/c ............................................ Dr.

     To Misc . Income A/c

Is there any Taxation effect occur in future  ?

Please suggest.

 

 

Replies (5)

That deduction directly reduces your respective expenses.

Ok but the head is appropriate na as Miscellaneous Income?

Let say, you're paying "ABC expenses" monthly to a party. In some month you deduct some money as penalty, then you record net expenses only and you'll be raising a debit note to him for documentation.

Here in the books of the manufacturing co.



safety expense is income in there books.
the co charges fine.
its an expense on the partys books.

What does safety expense refer to? Is it like a fund or reserve that is being made?

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