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Accounting EntriesIn this chapter, the accounting entries created for accounting localization taxes are discussed. In the general ledger proper accounts need to be defined for accounting localization taxes. Accounting entries will be created on completion of the respective transaction and the same can be imported to General Journal.

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Accounting entries in India Local InventoryThe following Accounting Entries are passed in India Local Inventory.

On Receipt of MaterialAccount Inventory Receiving A/c AP Accrual A/c Debit PO price PO price Credit

On Claiming CENVAT creditAccount Inventory Receiving A/c AP Accrual A/c BOE/ customs duty paid a/c CENVAT A/c Inventory Receiving A/c CENVATable tax amount * CENVAT percentage CENVATable tax amount * CENVAT percentage Debit Total tax amount Credit Taxes other than customs duty & CVD Only customs duty and CVD amount

Creation of Invoice for accounting III rd party taxesAccount AP Accruals Supplier a/c Debit Tax amount of the respective tax Credit

Tax amount respective tax

of

the

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Delivery of Material For Average Costing Organization ( Bonded Warehouse Sub Inventory)Account Sub inventory A/c Debit All non-CENVATable taxes + Amount not loaded in CENVATable taxes Credit

Inventory Receiving A/c

All non-CENVATable taxes + Amount not loaded in CENVATable taxes

* In addition to passing these accounting entries, Item cost gets increased by the amount that is additionally loaded on to the inventory.

Delivery of Material For Standard Costing Organization ( Bonded Warehouse Sub Inventory)Account Purchase Price Variance (PPV) A/c Debit All non-CENVATable taxes + Amount not loaded in CENVATable taxes Credit

Inventory Receiving A/c

All non-CENVATable taxes + Amount not loaded in CENVATable taxes

Delivery of Material (Duty paid Sub Inventory-non bonded)For Average Costing Organization Account Sub inventory A/c Debit All tax amounts both CENVATable/ non-CENVATable taxes except Individual taxes Credit

Inventory Receiving A/c

All tax amounts both CENVATable/ non-CENVATable taxes except Individual taxes * In addition to passing these accounting entries, Item cost gets increased by the amount that is additionally loaded on to the inventory.

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For Standard Costing Organization Account Purchase Price Variance (PPV) A/c

Debit All tax amounts both CENVATable/ non-CENVATable taxes except Individual taxes

Credit

Inventory Receiving A/c

All tax amounts both CENVATable/ non-CENVATable taxes except Individual taxes

Delivery of Material (Bonded/Duty paid Sub Inventory)For All Other Taxes Account Respective Tax A/c Inventory Receiving A/c Debit Tax amount * Tax credit percentage Credit

Tax amount * Tax credit percentage

Delivery of expense item to Bonded/Duty paid Sub Inventory(Both Average and Standard Costing) Account Expense A/c Note 1 Inventory Receiving A/c Debit Total Tax amount Credit Total Tax amount

Note: 1. Where the delivery of an Inventory Item is made to an Expense Subinventory, the Expense Account is picked up from the Subinventory setup. Similarly, the same account would be considered for reversal entries created on Return to receiving.

Return to VendorsReturn to Receiving(Bonded Sub Inventory)On Return from Inventory to Receiving Inspection (By Base product) Account Debit Receiving Inspection A/c Item Purchase Price Inventory Receiving A/c Credit Item Purchase Price

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On Return from Inventory to Receiving Inspection (Localization entries)Return to receiving for Average Costing OrganizationAccount Inventory Receiving A/c Debit All Non-CENVATable taxes loaded to inventory for the delivery Credit

Sub Inventory A/c

All Non-CENVATable taxes loaded to inventory for the delivery

Return to receiving for Standard Costing OrganizationAccount Inventory Receiving A/c Debit All Non-CENVATable taxes loaded to inventory for the delivery Credit

Purchase Price Variance (PPV) A/c

All Non-CENVATable taxes loaded to inventory for the delivery

Return to Receiving (Duty paid Sub Inventory) For Average Costing OrganizationAccount Inventory Receiving A/c Debit All tax amounts both CENVATable/ non-CENVATable taxes except Individual taxes Credit

Sub Inventory A/c

All tax amounts both CENVATable/ non-CENVATable taxes except Individual taxes

* In addition to passing these accounting entries, Item cost gets increased by the amount that is additionally loaded on to the inventory.

Return to Receiving (Duty paid Sub Inventory For Standard Costing OrganizationAccount Inventory Receiving A/c Debit All tax amounts both CENVATable/ non-CENVATable taxes except Individual taxes Credit

Purchase Price Variance (PPV) A/c

All tax amounts both CENVATable/ non-CENVATable taxes

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except Individual taxes

On Return to Receiving Inspection to Vendor (by Base Product)Account AP Accrual A/c Receiving Inspection A/c Debit Item Purchase Price Credit Item Purchase Price

On Return to Receiving Inspection to VendorAccount AP Accrual A/c Receiving Inspection A/c CENVAT A/c Debit Total Tax Amount at the time of Receipt Credit

Individual Tax A/c

All taxes loaded to inventory for the Receipt Amount of CENVAT Originally Claimed (Only on Generation of Excise Invoice on RTV) Taxes (except Excise & CVD) with CENVAT

On Return to Vendor in the year of PurchaseIn case a part of goods received are returned in the year of purchase, then following entries would be passed on RTV Dr. CENVAT Account Cr. CENVAT Receivable Account Dr. Inventory Receiving Account Cr. CENVAT Account For the balance amount (Balance credit for a Quantity returned) 100% of the credit for the Quantity Returned

On Return to Vendor a year after Purchase (After claim of 100% CENVAT Credit)Dr. Inventory Receiving Account Cr. CENVAT Account 100% of the credit for the Quantity Returned

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Accounting entries on claiming CENVATAccounting entries on Claiming CENVAT on inputsAccount CENVAT Raw material A/c Inventory Receiving A/c Debit CENVATable tax amount * CENVAT percentage Credit

CENVATable tax amount * CENVAT percentage

Accounting entries on Claiming CENVAT on capital goodsAccount CENVAT Capital goods A/c Inventory Receiving A/c CENVAT receivable Account Percentage of credit deferred for the next financial year Percentage of credit deferred for the next financial year Debit CENVATable tax amount * CENVAT percentage Credit

CENVATable tax amount * CENVAT percentage

CENVAT Capital goods Account

Accounting entries on claiming the balance credit on capital goodsAccount CENVAT Capital goods Account CENVAT receivable Account Debit Amount of credit that is being availed Credit

Amount of credit that is being availed

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Accounting entries regarding OSP TransactionWhile sending the material through 57 F (4) ChallanAccount OSP Excise A/c Debit With percentage of duty set up in the additional organization information screen Credit

CENVAT / PLA A/c

With percentage of duty set up in the additional organization information screen

On receipt of goods cleared under 57 F (4) ChallanAccount CENVAT A/c OSP Excise A/c Debit Duty paid at the time of clearance Credit

Duty paid at the time of clearance

* According the current provisions of Excise Rules there is no need to pay duty while clearing the goods for sub contracting operations. User should take care to record zero percentage for OSP rate in the additional organization information

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RMA ReceiptsRMA Receipts into a Bonded WarehouseFor the sale price amount with out excise duty. Account Sub inventory a/c Cost of goods sold a/c Debit Sales Inventory Cost Credit Sales Inventory Cost

RMA Receipts considered as Production InputCENVAT Credit For Excise and CVD Taxes Account Debit CENVAT RM/CG A/c Tax Amount Excise Paid Payable Account Credit Tax Amount

RMA Receipts considered as Finished Goods ReturnLocalization accounting entry for Excise Tax treatment Account Debit CENVAT RM/CG A/c Excise Amount Excise Paid Payable Account Credit Excise Amount

RMA Receipts considered as ScrapAccount Scrap Cost a/c Sub Inventory a/c Item cost Item cost Debit Credit

Localization accounting entry for Excise Tax treatment Account Debit Excise Expense a/c Excise Amount Excise Paid Payable Account (Excise duty paid will be written off as an expense account)

Credit Excise Amount

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Accounting entries related to AP invoicesOn Matching the Payable Invoice with PO/ReceiptLocalization Entry for Tax amounts Account AP Accruals a/c Debit Sum of Tax amount of the respective tax + Line Amount Credit

Vendor a/c

Sum of Tax amount of the respective tax + Line Amount

On Creation of Credit Memo at the time of approving the created Regular Invoice for TDS DeductionAccount Vendor a/c TDS a/c Debit Amount debited towards TDS Credit

Amount debited towards TDS

On Creation of TDS Invoice at the time of approving the created Regular Invoice for TDS deductionAccount TDS a/c TDS Tax Vendor a/c Debit Amount debited towards TDS Credit

Amount

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