Direct or indirect income

5795 views 3 replies

Ajay Singh Bhati

Manager (Accounts)

215 Points Joined July 2009

Hi, My Query is regarding income from business. We are running a textile manufacturing industry.

After manufacturing the finished goods, we deliver this goods to our customers with the invoice, which also includes an additional Transportation Charges except the price of the goods and also sometimes Insurance charges if the customer is an overseas customer.

The price of the goods goes to sales account directly which is my direct income; but I want to know what kind of income is Transport charges and Insurance charges which we collect from our customers. Is it direct income or indirect income.????

Suggestions needed.

Thanks in advance.

Ajay

Replies (3)

Devendra

Chartered Accountant

4780 Points Joined March 2009

The transport charges received is mere reimbursement of expenses. As per my knowledge, the Transport charges should be shown as Direct income, as the same is incidental to the main activity ie. sale of clothes.

Whereas, income which is non-recurring, exceptional or which is earned from an activity which is not the main objective of the entity shall be shown under the head Indirect Income.

Regards,

Devendra Kulkarni