Accounting entry and cost of the item

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 July 2014 The accounting entry for a purchase is here as follows,
Dr.Purchases 1000
Cr.Supplier 800
Cr.Scheme 200 (this is treated as income).
The problem is that this scheme they deduct is actually paid by us for their sales promotion expenses (for purchasing gifts,for giving credit note for distributors etc.)
So here are the questions,
1.Should we treat the Rs.200 Scheme as liability?
2.What is the product cost actually we incur for the above product.

Vishnu Saboo

Vishnu Saboo (Expert)
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30 July 2014 yes, if this is not certain income than you must keep it in liability until income is finalized.

Querist : Anonymous

Querist : Anonymous (Querist)

30 July 2014 so what is the product cost

Vishnu Saboo

Vishnu Saboo (Expert)
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30 July 2014 Purchases - Scheme actually received.

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Querist : Anonymous

Querist : Anonymous (Querist)

30 July 2014 Thank you for your answer sir. I thought it this way Rs.800 we pay directly to supplier through cash or bank and the balance Rs.200 is paid on behalf of the supplier by us, so the total cost incurred by us comes to Rs.1000.

Vishnu Saboo

Vishnu Saboo (Expert)
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30 July 2014 ofcourse, if whole of 200 is incurred by you in sales promotion etc, your total cost will come 1000/- but if you incur only 190 out of 200 your scheme amt will 200-190=10.

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