ACCOUNTING FOR CREDIT NOTE

[S.C. WADHWA]

33	A Pvt. Ltd. Co. made sale of its products to Foreign Co.
	Such foreign Co. found short quantity of material.
	Accordingly, it issued us debit note towards material
	short received by it.
	It also debited our account towards duty and handling charges
	borne by it on same.
	As far as, value of material s concerned, same
	shall be credited by us in sales return account.
	Query is
1	In which account we should credit the party
	for such duty and handling charges.
2	Foreign Company given us debit note on dated 01/11/14
	in respect of sale made dt. 01/07/14. Which exchange rate
	should be used to calculate credit note amount i.e.
	whether date of sale or date of debit note issued by it
	or date when we issue credit note.

AI Summary

Accounting for Debit Note: Use Exchange Rate on Credit Note Issuance Date; Record Expenses as Damages and Losses. A private limited company sold products to a foreign company, which later issued a debit note due to a shortfall in material quantity and additional duty and handling charges incurred. The query involves how to account for these charges and which exchange rate to use for the credit note: the sale date, the debit note date, or the credit note issuance date. The response suggests recording the transaction on the credit note issuance date using the prevailing exchange rate and debiting the expenses to an appropriate account such as damages and losses.