Discoun given to debtors reimbursement by hul

This query is : Resolved

Sagar Das (Querist)
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01 July 2016 we are FMCG distributors of HUL, and we give discount on invoice from our basic Margin, and these amount reimbursement by HUL , what is the accounting of this event.

please suggest me..

Sagar Das

Sagar Das (Querist)
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25 July 2016 we are FMCG distributors of HUL, and we give discount on invoice from our basic Margin, and these amount reimbursement by HUL , what is the accounting of this event.

please suggest me..

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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21 July 2024 When you are a distributor of Hindustan Unilever Limited (HUL) and you provide discounts to your customers (debtors) on invoices, which are subsequently reimbursed by HUL, the accounting treatment typically involves the following steps:

1. **Discount Given to Debtors (Customers):**
- Initially, when you provide a discount to your debtors on the invoice, you reduce your sales revenue by the amount of the discount. For example, if the invoice amount is ₹10,000 and you provide a ₹500 discount, your sales revenue would be recorded as ₹9,500.

2. **Reimbursement by HUL:**
- HUL will reimburse you for the discount amount that you provided to your customers. This reimbursement from HUL is treated as income because it is a recovery of an expense (the discount provided).

3. **Accounting Entries:**
- **When providing discount to debtors:**
- Debit: Debtors Account (Assets) - ₹10,000
- Credit: Sales Account (Revenue) - ₹9,500
- Credit: Discount Allowed Account (Expense) - ₹500

This entry records the reduction in sales revenue and the discount expense.

- **When reimbursed by HUL:**
- Debit: Bank Account (Assets) - ₹500 (assuming HUL reimburses you directly in cash or bank transfer)
- Credit: Discount Reimbursement from HUL Account (Income) - ₹500

This entry records the reimbursement received from HUL as income.

### Important Considerations:

- **GST Implications:** Ensure that GST implications are correctly accounted for on both the discount provided to debtors and the reimbursement received from HUL. GST is generally applicable on the net amount (after discount) unless specifically exempted or covered under input tax credit rules.

- **Documentation:** Maintain proper documentation including invoices, agreements, and reimbursement details to substantiate the transactions during audits or reviews.

- **Consistency:** Ensure consistency in accounting treatment across similar transactions to maintain accuracy and compliance with accounting standards and tax regulations.

By following these steps, you ensure that your accounting for discounts provided to debtors and reimbursement from HUL is accurate and compliant with accounting principles and regulations. If there are specific nuances or additional guidelines from HUL regarding such transactions, it's advisable to follow those as well.

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