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Accounting treatment of shis licence

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There is a listed textile company. It wants to purchase a SHIS licence from the market and it is available on the value of  60% of cost.

i.e.

 

Face value of SHIS Licence = Rs. 1,000/-

Purchase price of SHIS Licence = Rs. 600/-

Discount Received on purchase of licence = 400/-

 

Please specify the accounting treatment of such amount of discount.

Whether it should be shown as income in P/L account or to be shown as advance against assets under the head CWIP of Balance sheet.

And also specify the journal entries with respective amount for all treatment.

Replies (3)
Generally firms show it as purchase since it is consumed as a cost during the course of import amd the license include VAT. Yes the disc is credited to P and L.. Dr SHIS (FV) Dr VAT Cr disc and Cr Bank account.
However, obtain an expert opinion

Entry Of SHIS Licence Purchase:-

SHIS Licence Purchase A/c. Dr.    Rs.1000

Input Vat 5% On Shis Liecence A/c. Dr.  Rs. 29  (Accessable Consideration Value Rs.571)

To Vendor Account  A/c Rs. 600

To Shis Profit & Loss A/c Rs. 429 

(Being Shis Licence Purchase @ 60% of Face Value with Vat and balance tranfered to P & L A/c)


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