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.

[CAGOPALJI AGRAWAL]

The transaction would be entered on the date of issuance of credit note (deemed date of agreement of claim) on the exchange rate prevailing on that date. The expenses would be debited an appropriate account like damages and losses or any other caption which you consider relevant.

[DR.MARIAPPAN GOVINDARAJAN]

Thanks for this full information Mr. Gopalji Agrawal.

AI Summary

Accounting for foreign currency credit notes: use the exchange rate on credit note issuance and debit duties to an expense account. The value of goods short received is credited to the sales return account. The transaction is recorded on the date of issuance of the credit note, using the exchange rate prevailing on that date, and duties and handling charges are debited to an appropriate expense account such as damages and losses.