JOURNAL ENTRY FOR INCOME OTHER THAN SALE (SERVICE,COMMISSION,INTEREST AND OTHERS)

Journal entry for Service income (excluding TDS*)

Service income may be auxiliary income of the organisation in case of manufacture companies and direct income in case of service companies. The services are like contract, rental income, professional income and letting out assets are tax deductible services as per Income tax act.

*TDS=TAX DEDUCTED AT SOURCE.

 Let us see some illustration

Journal entry for service income

Job work service to X .Ltd for Rs.10000/-

                             X.Ltd A/C     Dr                10000

                                      To Job work income A/C              10000

(Narration: - Being job work provided to X. Ltd entered vide bill no. xx )

The rules for passing Journal entry

Debit

Here we are providing service to X ltd who is receiver of service. So, as per personal account rule(X. Ltd) "debit the receiver account"(Current asset)

Credit

Job work income is treated service income. So,as per nominal account rule(Job work Income) “credit all income or gains"(Revenue Account)

Journal entry for Service income (Including TDS)

Job work service to X .Ltd for Rs.10000/-

                             X. Ltd A/C                 Dr            9800

                             TDS Receivable A/C   Dr              200

                                      To Job work income A/C              10000

(Narration: - Being job work provided to X. Ltd entered vide bill no. xx)

The rules for passing Journal entry

Debit

Here we are providing service to X ltd who is receiver of service. So, as per personal account rule (X. Ltd) "debit the receiver account"(Current asset)

Debit

TDS receivable is treated as asset because the amount deducted by X ltd on income is used to set off against the tax provision at the year end. And it is shown as Current Asset in balance sheet. So, As per Real account rule(TDS receivable) “Debit what comes into business"(Current asset)

Here in above case TDS is calculated on job work income .TDS @ 2% on 10000 =200/-

Credit

Job work income is treated service income. So,as per nominal account rule(Job work Income) “credit all income or gains"(Revenue Account)

Journal entry for Service income (Including Service tax)

The service tax is applicable on services, the service provider after crossing the service tax exemption limit of Rs.Ten Lakhs

Are liable to pay service tax,in case of manufacture the limit of Rupees ten lakhs is not applicable.

Job work provided to X. Ltd for Rs. 11000/-  

                   X. Ltd A/C              Dr                11000

                               To Job work income A/C              10000

                               To Service Tax Payable A/C           1000

(Narration: - Being job work provided to X. Ltd entered vide bill no. xx)

The rules for passing Journal entry

Debit

Here we are providing service to X ltd who is receiver of service. So, as per personal account rule (X. Ltd) "debit the receiver account"(Current asset)

Credit

Job work income is treated service income. So,as per nominal account rule(Job work Income) “credit all income or gains"(Revenue Account)

Credit

Here Duties and taxes payable will be treated as representative person. When duties are payable will be treated as liability and shown as current liability on liabilities side of balance sheet. So, As per personal account rule (Service ta payable) "credit the giver account"(Current liability)

(I.e. taxes collected from debtor are not an income it is a liability and it must be paid to concern tax authorities)

Ex: - EXCISE DUTY, VAT & SERVICE TAX.

Journal entry for service income (including TDS and service tax)

Job work provided to X. Ltd for Rs. 11000/- including service tax of 

Rs. 1000/-

          X. Ltd A/C                Dr           10800 

TDS Receivable A/C  Dr               200

                        To Job work income A/C               10000

                        To Service Tax Payable A/C            1000

(Narration: - Being job work provided to X. Ltd entered vide bill no. xx )

The rules for passing Journal entry

Debit

Here we are providing service to X ltd who is receiver of service. So, as per personal account rule (X. Ltd) "debit the receiver account"(Current asset)

Debit

TDS receivable is treated as asset because the amount deducted by X ltd on income is used to set off against the tax provision at the year end. And it is shown as Current Asset in balance sheet. So, As per Real account rule(TDS receivable) “Debit what comes into business"(Current asset)

Here in above case TDS is calculated on job work income .TDS @ 2% on 10000 =200/-

Credit

Job work income is treated service income. So,as per nominal account rule(Job work Income) “credit all income or gains"(Revenue Account)

Credit

Here Duties and taxes payable will be treated as representative person. When duties are payable will be treated as liability and shown as current liability on liabilities side of balance sheet. So, As per personal account rule (Service ta payable) "credit the giver account"(Current liability)

(I.e. taxes collected from debtor are not an income it is a liability and it must be paid to concern tax authorities)

Ex: - EXCISE DUTY, VAT & SERVICE TAX.