Accounting for material bought under exchange scheme

This can also be treated as Scrap Purchases or Materials for Reconditioning & Resale. The treatment is same for both. The resale value of the above item is to be treated as Scrap Sale or Reconditioned Item Sale. VAT will be applicable in both cases subject to any exemptions if any.

On of the basic principles of accounting is that any transaction has to be recorded at its intrinsic value.Thus in the instant case the sale of productes has to be recored at the full value and so also the getting of products in exchange. The latter will be accounted as purchase of items for resale the corresponding credit being given to the debtors account by issue of credit notes. Also the inventory register needs to be updated. There is no question of discount at all.