A company sells goods to buyer in another country and goods rejected by buyer later after arriving the shipment . Seller has insurance coverage and insurance company compensates the invoice value of goods rejected.
The seller has an agreement with insurance that he will resell goods to some other country on behalf of insurance company pay them salvage value to insurance.
Please advise journal entries.
Thanks in advance
Thank you for the reply. How to cancel the effect of sales made. And also how to pass journal entries while reselling goods and paying salvage to insurance company
1) To Cancel sales of goods return you have to pass Credit Note . and credit note entry
sales return ( export) A/c Dr
To Overseas debtors A/c Cr
( Goods rejected)
2) resale entry and salvage payable
Overseas Debtors A/c Dr
To Export sales A/c Cr
( resale and salvage payable to Insurance Company)
3) Salvage payment to Insurance Company
Salvage payable A/c Dr
To Insurance Company A/c Cr
( payable entry )
Insurance Company A/c Dr
To Bank. A/c Cr
( salvage payment)
please check modified entry as above .
O P Bagla & Co LLP
New Delhi
CA Inter
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Sri Aurobindo Gnostic Centre of Education
New Delhi
CA
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CAclubindia
