challenging - try it!!! - Accounts

Mobile Easy Charge rules the world. From CEO's to Chaya shop owners everybody is addicted to this syndrome. Well.. Jokes apart!

The following is a brief of the concept of Easy Charge:

To put it simple Easy Charge is nothing but the talk time credit that is transferred from Telecom operators to customers via Easy charge Agents.

Telecom Operators --------> Easy Charge Agents ----------> Retail Outlets ---------> Customers

The Easy Charge Agents profit counts on the margin that the Telecom operator gives the agent. Lets get into the numbers!!!

An Easy Charge Agent purchases Easy Charge (talk time) Worth, (say Rs. 10,600/-), the effective money he remmits to the Telecom Operator would be Rs. 10,000/ only .(The recharge credit (purchase) is transferred to his mobile from the operator directly.)

The Easy Charge Credit he transfers to the retail outlet would be Rs. 10,600/- The effective money he collects from the retail outlet would be Rs. 10,150/-. The retail outlet inturn sells it at Rs. 10,600/- to the customers.

Customers -------> Pays Rs. 10,600/- for his purchase from the Retail outlet..(Purchase Value Rs. 10,600)

Retail Outlets --------> Pays Rs. 10,150/- for his purchase from the EC Agent..(Purchase Value Rs. 10,600)

Easy Charge Agents--> Pays Rs. 10,000/- for his purchase from the operator..(Purchase Value Rs. 10,600)

Telecom Operators---> Gets Paid Rs. 10,000/- for his sales.(Sale Value Rs. 10,600)

Please advise on the accounting entries for the purchase and sale from the Easy Charge Agent's Point of view.

Entries in would be following according to Easy Charge Agent's point of view (in this case we have assumed telecom operator to be Airtel):

Purchases A/c ...Dr. Rs.10,000

To Cash A/c (for cash purchase)/ To Airtel A/c(for credit purchase) Rs.10,000

(For amount of talk time credit purchased from vendor Airtel.)

Cash A/c(for cash sales)/ Retailer's A/c(for credit sales) ...Dr. Rs.10,150

To Sales A/c Rs.10,150

(For amount of talk time credit sold & payment received for the same.)

Sales A/c ...Dr. Rs.150

To P&L A/c Rs.150

(For amount of profit earned being transferred to P&L A/c.

The above entries were made in the view that, first EC Agent purchase talk time credit from Telecom operater (in this case taken to be Airtel). And after that he sells this talk time to retail outlet at a price which is higher by Rs.150 then his purchase price. and books that much amount of profit in his P&L A/c which would later on then show in his balance sheet.