sales tax accounting entries

june23am · 02-15-2010, 01:53 AM

hello & assalamualikum, i need some guidance regarding entries for sales tax for discount for returns etc. assuming a business sells 50pcs juice @10 with sales tax of 16% with trade discount of 1% and cash discount for early payment 1%. what will be the value of sales tax will it be discounted price both cash and trade? and what will be journal entries for this. further 2pcs juices @10 were returned by customer what will be the accounting entry sales tax account will be debited i guess? i need journal entries for this if someone please.
second issue is assuming i m importing goods of value 500 and paying excise 5% and now for sales tax computation what amount will be charged will it be 500+5% ? please if you explain it by journal entries
third thing what in case of baddebts do i get relief? as in above example bad debts of value 100 in case of juices were occured, now how will i treat it for sales tax purpose? jazakALLAH

LapTop · 02-15-2010, 07:06 PM

When Sales-
A/R 575Dr
Discount 5Dr
Sales 500Cr
Out Put Tax 80Cr

When Payment received and discount Allowed for earlier payment @1%
Cash 570Dr
Discount 5Dr
A/R 575Cr

When Sales Returned
Sales Return 20Dr
Out Put Tax 3.5Dr
A/P 23.1Cr
Discount .4Cr

LapTop · 02-15-2010, 07:38 PM

in case of imported goods, the value determined under section 25 of the Customs Act, including the amount of customs-duties and central excise duty levied thereon

june23am · 02-16-2010, 12:37 AM

ok first JazakALLAH for your intensions, and i still have doubts regarding journal entries lets not break the chain, first entry for sales as far i been through trade discount is not included for accounting purpose or even for sales tax? and same is for cash discount which companies offer for prompt payment. now total sales amount will be at normal price
50 @10 = 500
-trade discount 5
-cash discount 5
amount for tax 490 and further output tax is 78.4
now issue is wether company to whom cash discount is offered avail this or not sales tax will be charged in above manner and journal entry will be
debit A.R (495+78.4) 573.4
credit sales 495
credit output tax 78.4

as cash discount is not yet been taken and is not sure it will be or not, is't it been allowed that if allowing discount is normal practice of business and amount of discount is quite reasonable than it can go through above entries/procedure? please correct me

seond step for purchase return
debit sales return 20 2 @10
debit output tax 3.2
credit A.R 23.2

if discount is been availed cash discount 1%
debit cash 544.698
debit sales discount 5.502
credit A.R 550.2
please do correct me if i m wrong with these entries. jazakALLAH,
bad debts releif i asked can i claim it or?

LapTop · 02-16-2010, 08:45 PM

HI,
Sales tax hamesha value of goods par lagta hay,, aap k question may 2 scenario banty han, ya to aap packs of Juice kisi retailer ko sale kar rahay han ya aap kud retalor hayn. Dono hi surton may juice ki retail price ho gi or sales tax retail price par hi lagy ga.

Is baat ko samjhayn k juice k mamly may aap normal procedure adopt nahi kar sakty han,, is mamly may retail price ka procedure adopt karna pary ga aap ko,,, Special procedure for retailer parhayn gay to samajh may aa jaye ga.

Kyon k Juice ki retail price us k daby par print ho gi is waja say sales tax usi price par 16% lagy ga or wo bhi printed ho gi,,

Sarfaraz.alam · 02-16-2010, 09:01 PM

Assalamu Alaikum,

Dear I m not a expert but i think the journal entries can be post like,

At the time of Sale (Suppose Buyer will get the Both Discounts)

A/R 568.40Dr
Discount(Trade)5.00Dr
Discount(Cash) 5.00Dr
- Sales 500.00Cr
- Sales Tax 78.40Cr(After both discount)
----------------------
578.40Dr 578.40Cr

If the buyer paid earlier and avail the cash discount

Cash 568.40Dr
- A/R 568.40Cr
-----------------
568.40Dr 568.40Cr

if the buyer can't avail the cash discount then

Cash 574.20 Dr
Discount(Cash) 5.00Cr
Sales Tax (Cash)0.80Cr
A/R 568.40Cr
-----------------
574.20Dr 574.20Cr

LapTop · 02-16-2010, 09:11 PM

Sarfaraz,,,
Mera kahna ye hay k aap nay jab taxable sales 500 ki ki han to sales tax @16% taxablesale par 80 rupees lagy ga,,,,,
Agar aap 78.4 rupees Sales tax charge karo gay tu is ka matlab ye nikalta hay k aap ki taxable sales 490 rupees ki han 500 ki nahi. Jabky aap 500 ki sales credit kar rahy ho,, ye entry 1 surat may sahi ho sakti hay k aap ki total sales may say 490 ki sales taxable hon or 10 rupees ki sales exempt from sales tax.

june23am · 02-17-2010, 02:56 AM

i still dont get it sir, main being manufacturer of juices sale kar sakta hon to final consumer? and if yes than yahi same 16% charge karon ga for tax? no retailer is involve na main retailer hon na he selling to retailer tab?...and agree i dont read it much "the act" but one thing i noticed the other day, it says "value of supply where trade discount is allowed" where trade discoutn is allowed the value of supply will be the discounted price (prior to the amount of sales tax). if following conditions are fulilled
1- discount allowed is in conformity with normal business practic and 2- the tax invoice shows the discounted price and related tax...i agree sales tax value of supply pay lagay ga than value of supply he to 490 hay after deducting both discount?...still confuse with this anyways jazakALLAH sir g

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by LapTop
 HI,
Sales tax hamesha value of goods par lagta hay,, aap k question may 2 scenario banty han, ya to aap packs of Juice kisi retailer ko sale kar rahay han ya aap kud retalor hayn. Dono hi surton may juice ki retail price ho gi or sales tax retail price par hi lagy ga.

Is baat ko samjhayn k juice k mamly may aap normal procedure adopt nahi kar sakty han,, is mamly may retail price ka procedure adopt karna pary ga aap ko,,, Special procedure for retailer parhayn gay to samajh may aa jaye ga.

Kyon k Juice ki retail price us k daby par print ho gi is waja say sales tax usi price par 16% lagy ga or wo bhi printed ho gi,,

<hr height="1" noshade id="quote"></blockquote id="quote">

LapTop · 02-17-2010, 06:44 PM

âretail priceâ, with reference to the Third Schedule, means the price fixed by the manufacturer, inclusive of all duties, charges and taxes (other than sales tax) at which any particular brand or variety of any article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the highest of such price;

âretailerâ means a person, supplying goods to general public for the purpose of consumption
Provided that any person, who combines the business of import and retail or manufacture or production with retail, shall notify and advertise wholesale prices and retail prices separately, and declare the address of retail outlets, and his total turnover per annum shall be taken into account for the purposes of registration under section 14.

taxable supplies specified in the Third Schedule shall be charged to tax at the rate of sixteen per cent of the retail price which along with the amount of sales tax shall be legibly, prominently and indelibly printed or embossed by the manufacturer on each article, packet, container, package, cover or label, as the case may be

june23am · 02-18-2010, 02:35 AM

sir g i got your point main nay ye parha in the act but still not sure about journal entries, ap ye kah rahay ho k main not being a retailer, being manufacturer still will follow the same procedure? i asked main public ko sale nahi kar sakta? if yes than still i have to go with retail price? and i asked about bad debts, coz other day i was going through u.k vat and noticed for bad debts they can claim refund is there any such thing in here?

LapTop · 02-20-2010, 07:17 PM

Dear, may Accountant nahi ho or na hi mery pass koi accounting ki degree hay,,, par may Law ko achi tarhan samajh sakta hon, Sales Tax may mukhtalif procedures hayn mukhtalif businesses k liye,,
Ik bat zahan may bitha layn, k sales Tax sirf Item par lagta hay ab chahay wo goods ho ya services,,,
App bayshak manufacturer ho par aap jo item bana rahy ho wo third schule may aata hay or jo item third schedule may aaty han un ki price retail hoti hay or retait prise pay sales tax charg hota hay,,
App ko chayea k kisi Tax Consultant say legal opinion layn, tab aap ko accounting treatment aasani say samajh aa jaye ga.

june23am · 02-21-2010, 12:22 AM

it is clear to me, ap jitnay ke invoice charge karo gay mean tax invoice issue karo gay that much tax you will pay to state. in my case when i say k 50pcs juices @10 which is 500 with 1%trade discount which is 5 and 1% cash discount which is 1%. now after completing all requirements as per act as it said k if business discount offer karta hay to sales tax ke amount will be discounted price of item even if wo third scedule ka hay, no matter i have to pay 16% of 10 according to law but still if i sell these on discount of 1% than i will pay to state 16% of 9 not 10. question is trade discount to i know k at the time of sales/purchase i adjusted by reducing tax invoice to 495 (500-5 1%trade discount), but cash discount coz it is not sure k customer wo discount avail karay ga ya nahi, is why we consider this cash discount taken too if it is a reasonable amount, mean if aik banda tax invoice katay aur price ka 50% discount day day to it is wrong, a reasonable portion can be permited. so journal entries or tax will be charged at 490 (495-10) 1% of trade discount and 1% of cash discount which we charged on tax invoice, but ye tab possible hay k jo invoice issue karain gay us pay sales 490 mention ho after deducting discounts, and will pay tax of 78.4
<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by LapTop
 Dear, may Accountant nahi ho or na hi mery pass koi accounting ki degree hay,,, par may Law ko achi tarhan samajh sakta hon, Sales Tax may mukhtalif procedures hayn mukhtalif businesses k liye,,
Ik bat zahan may bitha layn, k sales Tax sirf Item par lagta hay ab chahay wo goods ho ya services,,,
App bayshak manufacturer ho par aap jo item bana rahy ho wo third schule may aata hay or jo item third schedule may aaty han un ki price retail hoti hay or retait prise pay sales tax charg hota hay,,
App ko chayea k kisi Tax Consultant say legal opinion layn, tab aap ko accounting treatment aasani say samajh aa jaye ga.

<hr height="1" noshade id="quote"></blockquote id="quote">

LapTop · 02-21-2010, 01:32 AM

June bhai may abhi bhi apni baat par kayem hon, k sales tax 500 pay hi lagy ga agar aap juice ki baat karo gay,,, han agar aap koi or item sale karty ho jo third Schedule may nahi hay to aap sahi ho..

june23am · 02-21-2010, 03:12 AM

hmm sir g ab ye issue hay, coz one of my friend jo kisi charted accountant k pas hain they file income tax and sales tax, he told me k ap nay jo invoice pay price rakhi hay mean jo total amount hay invoice pay us pay tax lagay ga. un ko manna para coz they are working from last 10 years balkay more than this, abhi lets see k kisi aur ka kia opinion hay about it, ap ke bat samajh gaya hon k juice special item hay according to scedule 3 but still .. according to that special item even ap nay retailer ko diso**** pay issue ke hay still tax will be on actual price written on pack of juice, k jitnay ka wo final consumer tak pohnchay ga. but i said i m not selling it to retailer main final consumer tak 1% discount k sath pohncha raha hon may b is leay i have to pay tax on invoice amount only.
<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by LapTop
 June bhai may abhi bhi apni baat par kayem hon, k sales tax 500 pay hi lagy ga agar aap juice ki baat karo gay,,, han agar aap koi or item sale karty ho jo third Schedule may nahi hay to aap sahi ho..
<hr height="1" noshade id="quote"></blockquote id="quote">

LapTop · 02-22-2010, 02:05 AM

Clause (a) Sub Section (2) of Section 3,,,

Taxable suplies specified in Third Schedule shell be charge to tax at the rate of Sisteen Per cent of the Retail Price which along with the amount of sales tax shall be legibly, prominently and indelibly printed or embossed by the MANUFACTYRAR on each article, packet, container, package, cover or label, as the case may be.

is Section may saf saf likha hay k sales Tax retail price par charge ho ga,,,,,,

Ab agy aap ki marzi,