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Accounting entry

varun (student) (96 Points)

03 February 2016

i want to know what will be journal entry in a logistic company (CHA) for providing services. as comapny charges two type of amount from its clients. 1. for providing services 2. for payment at port on behalf of clients. the company generae invoices for the first transaction and debit note for the second transaction. thank you

as per my knowledge for the amount for which invoice is being generate entry will be for service provided with applicable ST party dr to Sevice revenue to sevice tax and after getiing payment cash or bank dr to party ..my question is for debit note where no ST and the amount of debit note is reimbursed by customer as being paid on behalf of customer.... and also tell me the said customeduty or port charges will be under which head,,in tally thanks

PLZ ONLY PEOPLE HAVING KNOWLEGE IN THIS FIELD DO REPLY...

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9 Replies

CMA Poornima Madhava (CMA) (13112 Points)
Replied 03 February 2016

I think you can have separate accounts for customs duty and port charges under Indirect expense
When you pay customs duty and port charges, you debit the expense account and credit bank/customs
When the same is recovered from importer (client) via debit note, credit the same to the respective expense account and debit the client a/c
The net effect of expense account will be zero for payments made on behalf of clients

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varun (student) (96 Points)
Replied 03 February 2016

but ultimately my P/L a/c will increase by heavy exp which is not really my exp...while the revenue will increade by only the amount of service receivable...?????? reply

by the way ..thanks

CMA Poornima Madhava (CMA) (13112 Points)
Replied 03 February 2016

How will it increase if you follow what I suggested?

For example (paid customs duty on behalf of client)

Payment to customs: Customs duty Dr......To Bank/Customs a/c
Recovery from customer: Customer Dr ......To Customs duty

If the above is done, the net effect of customs duty a/c would be zero.

varun (student) (96 Points)
Replied 03 February 2016

u already said that custome duty under indirect exp and indirect exp comes under P/L A/c

CMA Poornima Madhava (CMA) (13112 Points)
Replied 03 February 2016

So what? Net effect of expense account is zero. If so, final balance in P&L a/c is also zero with respect to that account.

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varun (student) (96 Points)
Replied 03 February 2016

and there is no logic to show it as own Exp which is really not our....i appreciate you..atleast u replied..plz confirm ...i am waiting......

CMA Poornima Madhava (CMA) (13112 Points)
Replied 03 February 2016

Logic is very much there because you yourself have said that it is reimbursement of what you have paid. If you have incurred expense, that can only be reimbursed in this case. Meaning of reimbursement: https://dictionary.reference.com/browse/reimbursement

varun (student) (96 Points)
Replied 04 February 2016

verb (used with object), reimbursed, reimbursing.

1.to make repayment to for expense or loss incurred:

The insurance company reimbursed him for his losses in the fire.

to pay back; refund; repay.

......dear

to make repayment to for expense or loss incurred:.....what i am getting ...making repayment for exp....incurred= reimbursment....here it is exp for the person who is making payment..and not the person who is being reimbursed....and plz consult from someone....

what i am getting u have never done a/c entry relating to my question..

u r giving reply on ur own logic only..

Sivaramakumar (GM-ACCOUNTS) (142 Points)
Replied 13 February 2016

Dear Varun,

All sums paid on behalf of clients needs to be taken to Advances recovarable be it duty or port charges under the head Debtors if it is likely to be reimbursed. for a better understanding you may have two ledger, duty receivable & port charges receivable under the group for a better clarity.Since taking to profit and loss account may result in a inflated situation on both exp and revenue if it is not closed within the financial year,and moreover it is not our expenses to be booked as you rightly suggested.

if you feel that reconcilation process would be hard if there is more transactions on reimbursement, a healthy practice would be debiting the party account when the expenses in incured and credited on reimbursement. This would avoid unneccessary monitoring of sub ledgers created. and any short or excess recovery would be factored in the party ledger itself.

But beware, the act has been amended and any reimbursement of taxable services is liable for service tax whether raised by debit notes even on cost to cost basis. ( now receipt of consideration for a taxable service is under the purview of the definition service.)

Hope your doubt is cleared.