JOURNAL ENTRY FOR PURCHASE IMPORTS AND SALE OF IMPORT MATERIAL IN DOMESTIC LOCATION

Journal Entry for custom duty on purchase import

Custom duty is applicable on purchase imports, the importer is liable to pay duties on import of material. Duties include Custom duty, Excise duty, Additional Excise duty & cess (Education cess, Secondary higher education cess) on both custom duty & excise duty. The duty details are available in Bill of Entry document issued by Custom authorities at import location.

The entry will be as follows: -Import of 100000/- worth material.  

                             Custom Duty A/C                         Dr      7500 

                             Excise Duty received A/C             Dr      12000

                             Add.Excise Duty received A/C      Dr      4000

                             Cess                                           Dr      1141

                                                To Bank A/C                                      24641

(Being import duties paid against bill of entry no: 123456789)

Rules for passing entry

Debit

Custom duty paid on imports of material will be treated as expense and it is added to purchase while preparing profit and loss account. In case of custom duty paid on import of machinery then the duty will be added to machinery cost as per accounting standard 10 “Accounting for Fixed assets”

As per Nominal account rule (Custom duty) "Debit all expense or loss"(Expense account)

Debit

As we are paying Excise duties on purchase import of material are eligible for Input credit and treated as asset.(I.e. the taxes paid to creditors are not expense and it has to be treated as asset and can be set off against the duties payable, But before treating it as asset the input eligibility should be checked. Normally the purchase related to manufacture Except Factory building items Ex-Cement& steel can be availed as Input credit)Ex: - EXCISE DUTY, VAT & SERVICE TAX.

Duties which are eligible for input credit are treated as asset. So, As per Real account rule (Excise duty) "Debit what comes into business"(Asset)

Debit

As we are paying Addl. Excise duty duties on carriage inward are eligible for Input credit and treated as asset. So, Duties which are eligible for input credit are treated as asset. So, As per Real account rule (Excise duty) "Debit what comes into business"(Asset)

Debit

Cess paid on imports of material will be treated as expense and it is added to purchase while preparing profit and loss account. In case of custom duty paid on import of machinery then the duty will be added to machinery cost as per accounting standard 10 “Accounting for Fixed assets”

As per Nominal account rule (Cess) "Debit all expense or loss"(Expense account)

Credit

The duties should be paid through online payment , by this there is outflow cash. So ,As per Real account rule (Bank) "Credit what goes out of business"(Asset)

Journal Entry for sale of import material

In case of trading sale the duties whatever received will be passed to net stage buyer.

Journal entry as follows: - Sale of  X material at 145000 to Belo Ltd

                     Belo Ltd       A/C              Dr      145000       

                               To sale          A/C                             129000

                               To Excise duty payable A/C               16000(12000+4000)

(Being goods sold to belo ltd)

Rules for passing entry

Debit

Here we are selling goods on credit and the party who buys goods will become debtors. Debtor is receiving goods.

So, as per personal account rule(belo ltd) "debit the receiver account"(Current asset)

Credit

When we are selling goods, they are going out of business.

So, as per real account rule(sales) “credit what goes out of business"(Revenue Account)

Credit

Here Duties and taxes payable will be treated as representative person. When duties are payable will be treated as liability.

As per personal account rule (Excise duty 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.

Here in the above case sale price is calculated as below:-

Material Cost                                       100000/-   

Total cost + profit =124641+20359=   145000/-            

Custom Duty                                          7500/-

Cess                                                      1141/-

Excise duty                                           12000/-

Add. Excise Duty                                    4000/-                                                

          Total                                      124641/-