Reversal of income booked in previous year

Are they adjusting part of the money paid in the earlier year against this year's invoice? [10 Lakhs received and only 1 Lakh adjusted]. You can pass a Prior Period Transaction, if this 1 lakh is material considering the size of the company. Else, it can be adjusted against the income of current year. i.e. The sales can be booked net of the adjusted amount.

Hi Vidya:

regret for the confusion, the complete 10 lakhs plus tax are being adjusted from current year payment. And since the goods sold in current year are excisable and vatable, any booking of less than sale amount will result in mismatching of balance sheet with Trading account being sumitted at the time of assessment, also liability of excise ad vat will be incorrectly recorded.

regards

So far as I have understood there are only two transactions

1. Rendering of service and charging 10 lacs plus service tax in FY 06-07
2. Sale of goods worth 20 lacs plus excise and VAT in FY 08-09.

The payment as regards the first transaction is made by ABC therefore closing that transaction. Now I fail to understand which amount is to be adjusted against the second transaction and paying the balance amount.

Kindly clarify.

HI Subhankar:

The customer wants to adjust the complete 10 lakhs +tax paid by him on 06-07 to be adjusted from 20 lakhs plus taxes in current year.

thanx

The Customer shall not be able to adjust transaction one with transaction two, the reason being that both the transactions are unrelated. It is not the case wherein a person who after paying for repairing a particular machine, buys a new machine and is willing to deduct the repairing charges paid.

It is not the case wherein the customer has not paid for earlier transaction.