Accounts

can any1 plz send me test paper 3/2008 i have to submit my answer papers...it would b realt great if some1 send me solutions on my email id :- dipeshvirani84 @ gmail.com

A good article to "Hot to treat VAT in Books of Accounts...

https://www.rediff.com/money/2005/may/11vat1.htm

Purchase 4%.....Dr.  100000

Input Vat 4%-----Dr.    4000

 TO  Discount A/C    10400

TO Vendor A/C.... 93600

Usually when a company purchases inventory the seller will state the credit terms. Sometimes the seller of the inventory must offer a discount if the amount owed is paid before the due date. 

To record the journal entry for payment of the amount due within the discount period, we must first calculate the discount.  The discount is recorded by decreasing the merchandise inventory account. So the journal entry to record this transaction would be a debit to accounts payable to reduce the full amount of the amount owed. A credit to merchandise inventory to reduce the inventory by the amount of the discount and a credit to cash for the amount paid – the full amount (or gross) minus the discount.

Instead, let’s assume that the bill was not paid during the discount period. This journal entry would not record a discount. Instead, the company would simply debit accounts payable to decrease the amount owed and credit cash.

Extract of AS-2 para 7 

"The costs of purchase consist of the purchase price including duties

and taxes (other than those subsequently recoverable by the enterprise from

the taxing authorities), freight inwards and other expenditure directly

attributable to the acquisition. Trade discounts, rebates, duty drawbacks and

other similar items are deducted in determining the costs of purchase."

So far i think the stock would be of90000 purchase cost - discount that is (10000-10%) and vat refundable would be3600 i.e. (4000-10%) and hence the stock would be of90000 as the purchase cost itself will eliminate the discount.

Warm Regards,

KRS