While auditing i found that , HO sales goods to its branches through a sales tax invoice and records sales and branch records purchase.
At year end the stock which is unsold at year end at branch level is sent back to HO for that they make sales tax invoice to HO and record it as sales and HO records it as purchase. Is this treatment correct?? In my opinion HO should make credit note for the same and record it as sale return whereas branch should record it as purchase return !!!
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Purchase return recorded as sales .
Replies (1)
The practice of recording internal stock returns as fresh sales and purchases is incorrect. It distorts financial statements and creates potential compliance issues under GST. The correct procedure is to issue Credit Notes to account for the returns properly, reflecting them as purchase returns in the branch books and sales returns in the HO books.
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