CA Vanamala Phani Kumar (Proprietor of M/s Vanamala and Co) (972 Points)
23 December 2011what is the difference between Turnover and sales......????????
if there are different what we take in account for calculating as per U/s 44AB
I mean limits 60lakhs(15lakhs)?????
Z
( )
(2960 Points)
Replied 23 December 2011
Text from guidance note on audit u/s 44AB
https://220.227.161.86/21025guide_44AB_dtc.pdf
In the “Guidance Note on Terms Used in Financial Statements”
published by the Institute, the expression “Sales Turnover” (Item 15.01) has
been defined as under :-
“The aggregate amount for which sales are effected or services
rendered by an enterprise. The term `gross turnover’ and `net
turnover’ (or `gross sales’ and `net sales’) are sometimes used to
distinguish the sales aggregate before and after deduction of returns
and trade discounts”.
The “Statement on the Amendments to Schedule VI to the
Companies Act, 1956” issued by the Institute, (Page 14, 1976 edition) while
discussing the disclosure requirements relating to `turnover’ states as
follows:-
“As regards the value of turnover, a question which may arise is with
reference to various extra and ancillary charges. The invoices may
involve various extra and ancillary charges such as those relating to
packing, freight, forwarding, interest, commission, etc. It is
suggested that ordinarily the value of turnover should be disclosed
exclusive of such ancillary and extra charges, except in those cases
where because of the accounting system followed by the company,
separate demarcation of such charges is not possible from the
accounts or where the company’s billing procedure involves a
composite charge inclusive of various services rather than a
separate charge for each service.
In the case of invoices containing composite charges, it would not
ordinarily be proper to attempt a demarcation of ancillary charges on
a proportionate or estimated basis. For example, if a company
makes a composite charge to its customer, inclusive of freight and
despatch, the charge so made should accordingly be treated as part
of the turnover for purpose of this section. It would not be proper to
reduce the value of the turnover with reference to the approximate
value of the service relating to freight and despatch. On the other
hand, if the company makes a separate charge for freight and
despatch and for other similar services, it would be quite proper to
ignore such charges when computing the value of the turnover to be
disclosed in the Profit and Loss Account.
The term, "turnover", has not been defined by the Order. Part II of
Schedule VI to the Act, however, defines the term "turnover" as the
aggregate amount for which sales are effected by the company. It
may be noted that the "sales effected" would include sale of goods
as well as services rendered by the company. In an agency
relationship, turnover is the amount of commission earned by the
agent and not the aggregate amount for which sales are effected or
services are rendered. The term "turnover" is a commercial term
and it should be construed in accordance with the method of
accounting regularly employed by the company.
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