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Freight amount in purchase invoice

deepak kumar (sr accountant) (114 Points)

21 August 2011

Dear Experts,

Our company is a manufacturing company i am posting my queries pointwise please clear.

1. When Supplier has charged Freight Amount in his sale bill, what entry we have to make in our books. For example Material cost Rs 100000/- Freight Amount Rs 20000/-(Reimburshment Amount) Total Amount Rs 120000/-

we are doing Following Entry

Purchase A/c ==============Dr Rs 100000/-

Freight & Cartage Inward======Dr Rs 20000/-

To Party A/c================Cr Rs 120000/-

And another entry

Freight & Cartage Inward =====Dr Rs 515/-

Service Tax Payable=========Cr Rs 515/-

Is i am doing correct entry or not ? I need your valuable Suggesion in this regard.

Deepak Kumar Saini

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8 Replies

pooranimaa venkataraman (CA) (30 Points)
Replied 21 August 2011

Hi,

The entries you pass is correct but you can make it an single and simple one.

Purchase A/c Dr Rs. 100000/-

Freight & Cartage Inward Dr Rs. 20515/-

Service Tax Payable Cr Rs. 515/-

Party A/c Cr Rs. 120000/-

1 Like

Sushmita (CA-Final(Intern)) (262 Points)
Replied 21 August 2011

hello all,

please explain me the entry of service tax payable and the amount of 515 how comes.

please explain guys and gals.

2 Like

deepak kumar (sr accountant) (114 Points)
Replied 22 August 2011

hi sushmita,

actully in case of service tax on freight has to be charged On 25% of freight value after taking abatement of 75% on total freight .let see this example.

25% of Rs 20000/-=Rs 5000/-

10.3/100*5000=Rs 515/-

Now i think this example will clear your doubt.

Deepak Kumar Saini

1 Like

deepak kumar (sr accountant) (114 Points)
Replied 22 August 2011

Hi Sushmita your profile is shows nominited what is this? Actully i am very new in this form.

Yogesh (Manager) (50 Points)
Replied 23 August 2011

Dear all, this is important to note that any price incurred in connection with purchase of inventory is forming part of inventory as per AS 2. Therefore, freight inward is also part of inventory for closing inventory valuation perspective.

Regards,

Yogesh

surender (Manager Accounts) (149 Points)
Replied 25 August 2011

Hy deepak,

Its seems you get Freight Amount Rs. 20000/-(Reimbursed Amount) from the sipplier.If yes the enry will following:

Purchase a/c .......dr. 100000

To party ...a/c....100000

Payment frieght to transporter...

frieght reimbursement a/c ...... Dr. 20000

To cash / bank 20000

When u get reimbusement of frieght

Cash/ Bank ....... dr. 20000

To frieght reimbursement a/c ...... Dr. 20000

On the service Tax side if you are getting all reimbursement of frieght bill then no need to do service tax Entry.

Please specify in detail..

1 Like

deepak kumar (sr accountant) (114 Points)
Replied 28 August 2011

Originally posted by : surender
	Hy deepak, Its seems you get Freight Amount 20000/-(Reimbursed Amount) from the sipplier.If yes the enry will following: Purchase a/c .......dr. 100000 To party ...a/c....100000 Payment frieght to transporter... frieght reimbursement a/c ...... Dr. 20000 To cash / bank 20000 When u get reimbusement of frieght Cash/ Bank ....... dr. 20000 To frieght reimbursement a/c ...... Dr. 20000 On the service Tax side if you are getting all reimbursement of frieght bill then no need to do service tax Entry. Please specify in detail..