Accounting Entry for Fine and Penalty

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Guest

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)

Guest

That deduction directly reduces your respective expenses.

Guest

Ok but the head is appropriate na as Miscellaneous Income?

Guest

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.