Theft by transporter

This query is : Resolved

M.Arshad (Querist)
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27 August 2008 Suppose we sold material worth rs 100 to a customer

During transit there is a loss of 5 Rs material and customer received material only worth 95/- .Now as per the contract with the transporter ,this loss to be recovered from the transporter

Now there are two ways to account it

1) First approach

Transporter Dr 5
&
Customer Cr 5

2)Second Approach

Sale Dr 5 RS
&
Customer Cr 5 Rs

Then

Transporter Dr 5
&
Misc Income Cr 5

plz let me know which one approach is correct and why ??

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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27 August 2008 You can issue a credit note of Rs 5 to the customer and pass the following entry:

Sales Dr 5/-
To Customer 5/-

Likewise issue a debit note to the transporter and pass the following entry;

Transporter Dr 5/-
To sales 5/-

M.Arshad

M.Arshad (Querist)
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27 August 2008 Then the net effect is same
Transporter Dr 5
&
Customer Cr 5

then why two entries???

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CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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27 August 2008 The two entries while routed through sales account will be self explanatory otherwise entry effecting customer's account as well asTransporter,s account may have to be explained.

M.Arshad

M.Arshad (Querist)
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27 August 2008 What about the second approach

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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27 August 2008 It should not be treated as a miscellaneous income as the ggods are lost in the year itself and recovery from transporter or insurance co should be adjusted in the trading account itself whether as a sale or otherwise.