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BRANCH ACCOUNTS

Kumar Gaurav (Going...to be C.A soon...) (1624 Points)

19 September 2007

DEAR ALL,

PLZ SOLVE MY QUERY. MY QUERY IS THAT IF WE SENT GOODS TO BRANCH AT MRP.(126710/-) AND IF BRANCH SOLD THE GOODS ON CASH AMOUNTING OF RS. 126000 MRP. ON RS. 125000 AFTER GIVING DISCOUNT OF RS. 1000/- THEN OUR CLOSING STOCK WILL BE 710/-

IS IT RIGHT OR NOT?

BUT HOW TO SHOW 1000/-ENTRY IN THE BOOKS BCOZ BRANCH HAS SHOWS DICOUNT ON INVOICE ALREADY

PLZ HELP ME URGENTLY

THANKS

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3 Replies

Amit Sureka (Finance Manager-India) (251 Points)
Replied 19 September 2007

First of all you need to know that inventory accounting is nothing to do with profir/loss on sale. From quantity point of view you dont have any stock left with you. So the question of closing stock dont arise. For valuation of inventory u need to have inventory. Sale can be shown at gross value and the discount need to shown seperately.

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(Guest)

SORRY, MR. AMIT I M NOT SATISFIED WITH UR ANSWER BCOZ IF A SELLER SHOWS SALES AS FOLLOWS: MRP VALUE -126000 LESS: DISCOUNT-1000 NET AMOUNT-125000(AFTER DISCOUNT) THEN WE WILL ENTER 125000 AS SALES AMOUNT IN THE BOOKS THEN WE DONT NEED TO SHOW DISCOUNT IN THE BOOKS.

Nitesh Jain (CA Final Student & Manager(Accounts & Taxation)) (91 Points)
Replied 19 September 2007

Sorry Mr. Sunny, The sales should be recorded at gross value and the discount is to be shown as expenses. Because Discount is a Indirect expense which is related to sales. All expenses related to sale are shown separately under Indirect Expenses. As the discount is already recorded at Branch, there is no need to take that at HO level. It will comes into account when Branch's Accounts are Prepared.