Freight Charge with Credit note in Book of Account

This query is : Resolved

Murtaza I Bhagat (Querist)
Follow

11 August 2009 Pls tell me on Cement Purchase
Payment of Excise and also Freight Charges,
When we received a Credit note of Freight Charge,what we have to take that credit in our book of account ?
How take entry of Excise,VAT & Freight Charge ?
If this Credit Refundable or not ?
& what about credit note given by seller ?

pls help me in this confusion.

thanks for your advise in advance

Murtaza I Bhagat

Murtaza I Bhagat (Querist)
Follow

20 November 2009 Pls tell me on Cement Purchase
Payment of Excise and also Freight Charges,
When we received a Credit note of Freight Charge,what we have to take that credit in our book of account ?
How take entry of Excise,VAT & Freight Charge ?
If this Credit Refundable or not ?
& what about credit note given by seller ?

pls help me in this confusion.

thanks for your advise in advance

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
Follow

25 July 2024 When dealing with transactions involving cement purchase, excise duty, freight charges, and credit notes, here’s how you can handle them in your books of accounts:

1. **Purchase of Cement including Excise and Freight Charges**:
- **Entry for Purchase**: When you purchase cement, you will debit the Purchase Account (Cement) for the net amount including excise duty and freight charges.
- **Excise Duty**: Excise duty paid on the purchase of cement will be recorded separately, usually under Excise Duty Payable or similar account.
- **Freight Charges**: Freight charges paid will also be recorded separately under Freight Charges account.

2. **Credit Note for Freight Charges**:
- **Receipt of Credit Note**: When you receive a credit note for freight charges (if the freight charges were overcharged or for any other reason), you should record this in your books.
- **Accounting Entry for Credit Note**: You will credit the Freight Charges account with the amount of the credit note.
- **Effect on Expenses**: This reduces your total expenses related to freight charges for the transaction.

3. **Treatment of Excise and VAT**:
- **Excise Duty**: Excise duty paid is a liability until you actually sell the cement. When you receive credit for the freight charges, it does not affect the excise duty liability directly.
- **VAT**: If applicable, VAT on the purchase of cement should be accounted for separately based on the VAT rules in your jurisdiction.

4. **Refundability of Credit Note**:
- **Check Terms**: Whether the credit note for freight charges is refundable depends on the terms and conditions agreed upon with the seller. If the credit note represents an overpayment or any other valid reason, you may be entitled to a refund.

5. **Credit Note Given by Seller**:
- **Accounting Treatment**: If you have issued a credit note to the seller (for example, for returned goods or other adjustments), you would reduce the amount payable to the seller in your accounts.

**Example Journal Entries**:
- **Purchase of Cement**: Debit Purchases Account (Cement), Credit Vendor Account
- **Excise Duty Payment**: Debit Excise Duty Payable, Credit Bank/Cash Account
- **Freight Charges**: Debit Freight Charges Account, Credit Bank/Cash Account
- **Receipt of Credit Note for Freight Charges**: Debit Freight Charges Account, Credit Vendor Account

Always ensure that your entries comply with accounting standards and tax regulations applicable to your business. If in doubt, it’s advisable to consult with a qualified accountant or tax advisor to ensure accurate and compliant recording of transactions in your books.

Upgrade to CAclubindia Pro. Subscribe Now!