Goods Damage

Dear Sir,

 

Due to flood and heavy rain some goods damage please suggest how to adjust in books of accounts i have done below entry in books

Damage goods Dr. Under expenses

Purchase ac Cr.

Its correct entry or not if yes how to reduse item wise stock from busy.

While filling ITR damage goods allow in Profit and loss account ?

ITC need to reverse in case ?

Or Can i need to transfer damage goods value to capital account.

 

 

Replies (2)
Quick Summary
This discussion addresses how to account for goods damaged by flood. The recommended accounting entry is to debit 'Loss due to flood' and credit 'Purchase' or 'Inventory'. You should also reduce your item-wise stock accordingly. Damage due to flood is generally allowable as an expense in the Profit and Loss account, and if ITC was claimed, it may need to be reversed according to GST regulations. Transferring the value to a capital account is not the standard procedure.

Here is how to adjust in the books of accounts based on your query:

  1. Entry correctness: You entry "Damage goods Dr.Under expenses" and "Purchase a/c Cr." seems to be aiming to record the loss. Amore appropriate way might be to debit "Loss due to flood" (under expenses) and credit "Purchase" or "Inventory" for the value of goods damaged.
  2. Reducing item-wise stock: You should reduce the stock value by the amount of damaged goods in your inventory records.
  3. Allowance in Profit and Loss account: Yes, damage due to flood is typically allowed as an expense in the Profit and Loss account.
  4. ITC reversal: If you have claimed Input Tax Credit (ITC) on those damaged goods, you might need to reverse it as per GST rules for goods lost or damaged due to unforeseen events like floods. 
  5. Transfer to capital account: Generally, you do not transfer damage value to a capital account as it is an expense related to business operations. 

This website won't change for the rest of your lives and don't believe anyone here. I was posting double entries for you and it says mobile thread 😂 

 

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