27 May 2011
we are having a contract with a recruitment company. AS per the contract we need to pay to the company a fixed % of employee's salary recuruited through the company. Moreover there is a provision in the contract as per which if the employee leaves our company within 3 months of joining than the recruitment company will pay us back the amount given to it. Hence the entry made earlier will have to be reversed by us.Moreover the TDS amount which was earlier booked by us while booking the expense has alraedy been paid to the government before reversing the entry.
1.My question is by what amount the party A/c will be debited in the reversal entry?
2. Moreover another expense transaction was made withe party. while booking the expense for the same tds was booked net of TDS paid to the government while booking the first above mentioned transaction.
Eg, Expense A/c Dr. 100 To Party A/c 90 To TDS PAyable A/c 10 (Being expense booked)
TDS PAyable A/c Dr 10 To BAnk A/c 10
Now the expense booked earlier was reversed, as under
PArty A/c Dr 100 To Expense A/c 100
Susequently, another entry was booked with the same party, as under
Expense A/c Dr 200 To PArty A/c 190 To Tds Payable A/c 10 (BEing expense booked....here tds as per rate @10% comes out to be Rs 20, but the same is recorded at Rs 10,ie, net of tds paid earlier to the government)
As we have debited the party with extra Rs 10 while reversing the first entry, the net payment made to the party was Rs 190 - 10 = Rs 180.
is the accounting treatment of the transaction correct. Please explain with legal proisions relating to TDS.
whether netting off the TDS while booking the expense itself is correct, or does it have any statutory liability.
29 May 2011
First transaction: You have paid Rs.90 and deducted and paid Rs.10/- as TDS to the government. So eventually the payment made to the client is Rs. 100/- and not Rs. 90/-.
Reversal of Expenses as per agreement was correctly recorded.
Second Transaction: In my view it is a separate transaction,event it is with the same party. The adjustment for TDS earlier deducted can not be made since TDS paid to the credit of Government and we can not do nothing about it. This kind of adjustment may possible in case of salaries but the same is not possible under any other section covering TDS. So in my view the correct amount of TDS would be Rs. 20/- and not Rs. 10.
CAclubindia
