Provision entry for Purchase
This query is : Resolved
09 April 2010
Hi,
I am working in a software company, we are reselling CAD/CAM etc., software. Currently, we can download all software with any security but we should have authorization.
So once we get a order from the customer we will invoice to customer without getting purchase bill.
We will get the purchase bill in a month.
But as a year end 31st March 2010, we have billed to some of our customer in the month of March 2010 but we haven't recv., the bill but it will get in the month of April 2010. So please guide me whether we can account bill dated in the month of April 2010 in the Month of March 2010.
Also, if i am purchasing at CST 2% against C Form, bill dated April 2010 if i am accounting in March 2010. Can I issue C Form in the period 1st Quarter of 2010-2011.
Please help me in the above case.
I am working in a software company, we are reselling CAD/CAM etc., software. Currently, we can download all software with any security but we should have authorization.
So once we get a order from the customer we will invoice to customer without getting purchase bill.
We will get the purchase bill in a month.
But as a year end 31st March 2010, we have billed to some of our customer in the month of March 2010 but we haven't recv., the bill but it will get in the month of April 2010. So please guide me whether we can account bill dated in the month of April 2010 in the Month of March 2010.
Also, if i am purchasing at CST 2% against C Form, bill dated April 2010 if i am accounting in March 2010. Can I issue C Form in the period 1st Quarter of 2010-2011.
Please help me in the above case.
09 April 2010
you cannot account april month bill in the month of March 10 . you can account in april 10 and issue C form in the first quarter of 2010-11.
10 April 2010
Dear Sir,
I have done sales for all these purchase in the month of March 10, then how can i show it in April.
I have done sales for all these purchase in the month of March 10, then how can i show it in April.
10 April 2010
Sales done in the year 2009-10 and purchase against that should be accounted in the year 2009-10 only. Then what shall i do in the above case for purchase.
10 August 2024
### Accounting for Purchases and Sales When Bills Are Received Late
In your situation, where you invoice customers in March but receive purchase bills only in April, and considering that you are dealing with CST and issuing C Forms, here’s how to handle the accounting and tax implications:
### 1. **Accounting for Purchases and Sales**
**a. Accounting Purchases**
Since you have billed customers in March 2010, you should account for the corresponding purchases in the same financial year to match the income and expense. This is crucial for accurate financial reporting and compliance. Here’s how to handle it:
**Provision for Purchase Entry:**
At the end of the financial year (March 31, 2010), you should create a provision for the purchases if you have not yet received the bills. This ensures that the expense is recognized in the correct financial year.
**Journal Entry for Provision:**
```plaintext
Date: March 31, 2010
Debit: Purchases Account ₹[Amount of Purchase]
Credit: Provision for Purchases ₹[Amount of Purchase]
```
**When the Actual Bill is Received (April 2010):**
Once you receive the actual bill, adjust the provision entry to reflect the actual purchase amount:
```plaintext
Date: [Date of Actual Bill]
Debit: Provision for Purchases ₹[Amount of Purchase]
Credit: Accounts Payable ₹[Amount of Purchase]
```
### 2. **CST and C Forms**
**a. Issuing C Forms**
C Forms are used to claim CST exemptions on interstate purchases. The form should be issued for the period in which the purchase is recorded.
**If you account for the purchase in March 2010:**
- **C Form Issuance:** You can issue the C Form in the period for which the purchase is recorded. Since the purchase is accounted for in March 2010, you should issue the C Form in the first quarter of 2010-2011 (April-June 2010) based on the purchase details.
**b. Accounting CST and C Forms**
- **Purchase Accounting:** Make sure to record the CST component correctly in your accounts.
- **C Form:** Ensure the C Form is issued for the period in which the purchase was recorded in your accounts to avoid discrepancies during tax audits.
### 3. **Sales and Purchase Matching**
**a. Sales and Purchase Timing:**
Since you billed customers in March 2010, the related purchases should be matched in the same financial year (2009-10). You cannot shift the purchase to the next year just because the bill is received later. Use provisions to account for these transactions in the correct period.
**b. Tax Implications:**
- **Sales:** The sales are recognized in March 2010, and the related purchase expense should also be recognized in March 2010 using a provision.
- **Purchase Bills:** Ensure to reconcile the actual bill with the provision once received and adjust the accounts accordingly.
### Summary
1. **Create a Provision:** At the end of March 2010, create a provision for purchases that are not yet billed but are related to sales made in March 2010.
2. **Record Actual Bill:** Adjust the provision with the actual purchase bill in April 2010.
3. **Issue C Forms:** Issue the C Form in the first quarter of 2010-2011 based on the purchases recorded in March 2010.
By following these steps, you ensure accurate financial reporting and compliance with tax regulations.
In your situation, where you invoice customers in March but receive purchase bills only in April, and considering that you are dealing with CST and issuing C Forms, here’s how to handle the accounting and tax implications:
### 1. **Accounting for Purchases and Sales**
**a. Accounting Purchases**
Since you have billed customers in March 2010, you should account for the corresponding purchases in the same financial year to match the income and expense. This is crucial for accurate financial reporting and compliance. Here’s how to handle it:
**Provision for Purchase Entry:**
At the end of the financial year (March 31, 2010), you should create a provision for the purchases if you have not yet received the bills. This ensures that the expense is recognized in the correct financial year.
**Journal Entry for Provision:**
```plaintext
Date: March 31, 2010
Debit: Purchases Account ₹[Amount of Purchase]
Credit: Provision for Purchases ₹[Amount of Purchase]
```
**When the Actual Bill is Received (April 2010):**
Once you receive the actual bill, adjust the provision entry to reflect the actual purchase amount:
```plaintext
Date: [Date of Actual Bill]
Debit: Provision for Purchases ₹[Amount of Purchase]
Credit: Accounts Payable ₹[Amount of Purchase]
```
### 2. **CST and C Forms**
**a. Issuing C Forms**
C Forms are used to claim CST exemptions on interstate purchases. The form should be issued for the period in which the purchase is recorded.
**If you account for the purchase in March 2010:**
- **C Form Issuance:** You can issue the C Form in the period for which the purchase is recorded. Since the purchase is accounted for in March 2010, you should issue the C Form in the first quarter of 2010-2011 (April-June 2010) based on the purchase details.
**b. Accounting CST and C Forms**
- **Purchase Accounting:** Make sure to record the CST component correctly in your accounts.
- **C Form:** Ensure the C Form is issued for the period in which the purchase was recorded in your accounts to avoid discrepancies during tax audits.
### 3. **Sales and Purchase Matching**
**a. Sales and Purchase Timing:**
Since you billed customers in March 2010, the related purchases should be matched in the same financial year (2009-10). You cannot shift the purchase to the next year just because the bill is received later. Use provisions to account for these transactions in the correct period.
**b. Tax Implications:**
- **Sales:** The sales are recognized in March 2010, and the related purchase expense should also be recognized in March 2010 using a provision.
- **Purchase Bills:** Ensure to reconcile the actual bill with the provision once received and adjust the accounts accordingly.
### Summary
1. **Create a Provision:** At the end of March 2010, create a provision for purchases that are not yet billed but are related to sales made in March 2010.
2. **Record Actual Bill:** Adjust the provision with the actual purchase bill in April 2010.
3. **Issue C Forms:** Issue the C Form in the first quarter of 2010-2011 based on the purchases recorded in March 2010.
By following these steps, you ensure accurate financial reporting and compliance with tax regulations.
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