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Editorial Board on Accounts and Audit
  • Treatment of Penalty

    by Chirag on Friday, August 16, 2019 at 10:25 PM

    A company has received from Rs 1 lacs to a contractor for Repairs & Maintenance work in Factory. Repairs & Maintenance A/c is debited in Books of A/c when bill was received from Contractor. At the time of Payment, Rs 20000 penalty was deducted by company due to wrong work done. Query- Entry for this penalty should be -- Contractor A/c Dr To Repairs & Maintenance OR ELSE it should be treated as Income in P& L A/c & entry should be -- Contractor A/c Dr To Income from penalty

    Replied byEditorial Board Monday, August 26, 2019 at 08:07 PM

    You may net off expense by reducing expenses with the penalty.

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