Credit Note with GST from Supplier

Accounts 236 views 2 replies

Hello Freinds, we have purchased a computer from computer system from a vendor of 2 qty. but any how we dont like the monitor and we have returned the 2 qty. the supplier has raised the credit note with gst, so how to accounts the invoice raised with gst in our books of account.

Replies (2)

A common scenario involving a purchase return and credit note with GST. Accounting Treatment: 1. *Initial Purchase*: When you purchased the computers, you would have recorded the transaction as a purchase, including the GST input credit. 2. *Purchase Return*: When you returned the computers, you should reverse the initial purchase entry, including the GST input credit. Journal Entries: 1. *Initial Purchase*: Debit: Computer Account (Asset) = Purchase Value + GST Credit: Vendor's Account (Liability) = Purchase Value + GST Credit: GST Input Credit Account = GST Amount 2. *Purchase Return*: Debit: Vendor's Account (Liability) = Purchase Value + GST Credit: Computer Account (Asset) = Purchase Value + GST Debit: GST Input Credit Account = GST Amount Credit Note Accounting: 1. *Credit Note Receipt*: When you receive the credit note from the supplier, you should record it as a reduction in the vendor's liability. 2. *Journal Entry*: Debit: Vendor's Account (Liability) = Credit Note Value + GST Credit: GST Input Credit Account = GST Amount (if applicable) GST Input Credit: 1. *Reversal of GST Input Credit*: Since you returned the computers, you should reverse the GST input credit claimed initially. 2. *GST Input Credit Account*: Debit the GST Input Credit Account to reverse the input credit claimed. Ensure you maintain accurate records and follow the correct accounting treatment to reflect the purchase return and credit note in your books of account. Consult a tax professional or accountant if needed.

When accounting for the invoice and credit note with GST, follow these steps:

Initial Purchase 1. *Record the Purchase*: Record the purchase of 2 computers in your books of account, including the GST input credit. -

*Journal Entry*: - Debit: Computer (asset account) with the purchase price (excluding GST) - Debit: Input GST (asset account) with the GST amount - Credit: Vendor account with the total invoice amount Return of Monitors 

1. *Record the Credit Note*: Record the credit note received from the supplier for the return of 2 monitors, including the GST adjustment. - 

*Journal Entry*: - Debit: Vendor account with the total credit note amount - Credit: Computer (asset account) with the proportionate reduction in asset value (excluding GST) - Credit: Input GST (asset account) with the proportionate GST adjustment GST Reversal 1. 

*Reversal of Input GST*: Since the monitors were returned, you may need to reverse the input GST credit claimed earlier. -

 *Journal Entry*: - Debit: Input GST (asset account) with the GST amount reversed - Credit: GST Payable (or GST Expense) with the GST amount reversed Net Effect The net effect of the above journal entries will be to reduce the asset value and input GST credit claimed earlier, reflecting the return of the monitors.

Consult with your accountant or tax professional to ensure accurate accounting and GST compliance.


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