Sale outside the state section 4

On 26-4-2011, M/s National Traders received a sales order from Excel Traders, Mumbai for 4 photo copying machines priced at ` 43,000 each. M/s National Traders raised a sales invoice for the said item vide invoice number 012, despatched 2 nos and requested the branch office – National Enterprises to despatch remaining quantity. CST @ 2% was charged while invoicing against C Form. The sale value and CST amount of goods despatched by branch office was reversed on 27-4-2011.

 

The above is a question given by Tally Solutions in its guidance book and following are the entries they gave:

 

Entry 1  (Interstate Sale Entry)

Excel Traders    175440

To Interstate Sales 2%             172000

To CST 2% - Interstate Sales   3440

 

Entry 2  (Reversal of Interstate Sales to Sales Outside the State)

Interstate Sales 2%     86000

To Interstate Sales - Tax Free         86000

 

Entry 3 (Transferring value of CST to Branch)

CST 2% Interstate Sales    1720

To National Enterprises 1720

 

My questions are following

I am clear as to the first entry.

But what are they doing in remaining two !!

 

Thanks

Shivani

shivaniadream @ gmail.com

 

 

 

 

 

 

 

Replies (3)

Dear Mam

In Entry 2 & 3 M/s National Traders is reversing its CST sales & CST liability in respect of 2 nos of qty sold by branch while retaining the sales to M/s Excel Traders in its books.

Dear Keshav

 

I can understand that National Trader would like to reverse the sale and CST in respect of 2 units.

So i can understand it debiting Interstate Sales 2% in Entry 2 and debiting CST 2% Interstate Sales in Entry 3 but it is what it is crediting in Entry 2 and Entry 3 is causing me confusion.

It is crediting interstate sales - tax free in Entry 2 and Branch in Entry 3 ! ! !

What does that mean?

 

Shivani

My understanding

When it credits Interstate sales - tax free, it is reducing it's own CST liability by moving the sale component of 2 printers to tax free sales, the second entry is a continuation in which it is moving the impact on the total tax liability to the branch office (National enterprises). Undoubtedly in the books of National enterprise, there will be a complementary entry about their CST.

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