SIRS
DUE TO UNFORESEEN CIRCUSMTANCES MY CLIENT UNABLE TO RAISE THE INVOICE AFTER COMPLETTION THE JOB. BUT SOME OF THE PAYMENT RECEIVED AS ADVANCE. THE AMOUNT STILL LYING AS LIABILITY IN THE BOOKS. ALSO THE CONSUMED MATERIALS NOT DEDUCTED IN THE INVENTORY TILL DATE. NOW WE PROPOSE TO WRITE OFF THE LIABILITY AND REDUCE THE CONSUMED MATERIALS IN THE INVENTORY.
PLEASE LET ME KNOW HOW TO MAKE ENTRIES TO FILE INCOME TAX
REGARDS
S.RAVICHANDRAN
All these transaction will fall under the head PGBP
Let us take one by one transaction
1. Advance payment received to be recognised as income
Accounting Entry: - Advances from customer A/c Debit and Revenue account should be credited (relevant Indirect Tax implication, if applicable should be considered)
Tax Effect: - Since this transaction is under ordinary course of business the income will be chargeable under section 28 of the IT Act
2. Reduction of stock
Accounting Entry: - Stock journal is required to be passed wherein the consumption of stock account (your expenses will be booked) should be debited and relevant stock a/c should be credited (your stock will be reduced and it should reflect the closing position of stock).
Tax Effect: - Even this transaction will fall under Section 37 of the Income Tax act and should be computed under the head PGBP.
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