Advance payment in profit loss statement

AS 274 views 2 replies

som

construction

34 Points Joined December 2008

The following trade happens between company A, B and C.

A supplies products to B. Only proforma invoice is given and payment is treated as advance. Tax invoice will be issued after reconciliation and that goes into next financial year.

B supplies products to C. Tax invoice is issued.

How does company B treat it in the profit and loss statement?

How does the advance accounted for ?

Replies (2)

CA Raj Doshi

Practising CA

8944 Points Joined December 2013

Dr Purchases
Cr A

for good received but bill not received.

Above treatment for B in the year of receipt of goods. And pass two entries in the year you receive the tax invoice
1. reversal entry of earlier entry
2. pass purchase entry of tax invoice

Theoretically, this seems well but practically, GST input tax credit issues will crop up and unnecessary excess payment will happen in earlier years.