JOURNAL ENTRY FOR MONTHLY EXCISE DUTY OUTPUT/PAYABLE
JOURNAL ENTRY FOR ADJUSTMENT OF CENVAT CREDIT AGAINST EXCISE DUTY PAYABLE.
Excise duty is levied on manufacturing of goods the manufacturer or trader of goods have benefit of availing excise duty input which is known as CENVAT credit at the time of purchase of raw material and other capital goods. CENVAT credit is adjusted against excise duty output, Before writing entry for adjustment I want to explain two terms 1) Excise duty input 2) Excise duty output
A) Excise duty input
Journal entry for purchase including excise duty of Rs.14000
Purchase A/C Dr 86,000
Excise duty Input A/C Dr 14,000
To Sundry Creditor A/C 1,00,000
(Narration:- Being goods Purchased on credit vide bill no:01)
The rules for passing Journal Entry
Due to purchase goods are coming into business. Goods are treated as asset.
As per Real account rule (Purchase) “Debit what comes into business"
As we are paying duties on purchase are eligible for Input credit and treated as current asset.(I.e. the taxes paid to creditors are not expense and it has to be treated as current asset.
As per Real account rule (Excise duty input) "Debit what comes into business"(Current Assets)
Due to credit purchase we are liable to him. And he is giving us the goods on credit. The creditors balance will increase.
As per personal account rule (sundry Creditor) "Credit the giver account"(Current Liabilities)
B) EXCISE DUTY OUTPUT
Journal entry for sale of goods including excise duty of Rs.14000/-
Sundry debtor A/C Dr. 1,00,000
To sales A/C. 86,000
To Excise output A/C. 14,000
(Narration:- Being goods sold to sundry debtors vide bill no:01)
The rules for passing Journal Entry
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(sundry debtors) "debit the receiver account"(Current asset)
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)
Excise duty collected from debtor is not an income it is a liability and it must be paid to Excise duty department authorities)
As per personal account rule (Excise duty output) "credit the giver account"(Current liability)
C) EXCISE DUTY ADJUSTMENT ENTRY
The excise duty output for each month should be paid by company to excise department after adjusting excise duty input. Here I am giving illustration for adjustment of excise duty input.
Excise duty input balance for the month of march is Rs.1,00,000/-
Excise duty output balance for the month of march is Rs.1,50,000/-
Excise duty paid account will be created for the adjustment entry ,the balance in excise duty output will accumulated throughout the year at the year end the excise duty paid accumulated balance is to be deducted from sales in statement of profit and loss account. Every month the excise duty paid account will be debited with the amount equal to excise duty output.
Journal entry for adjustment will be as follows
Excise duty paid A/C Dr 1,50,000
To Excise duty input A/C 1,00,000
To Bank A/c 50,000
(Being excise duty adjustment entry passed for the month of march)
The rule for journal entry
Excise duty paid account is treated as expense and the amount is equal to monthly closing balance of excise duty output account.
So, as per nominal account rule (excise duty paid) "debit all expense or losses"(Expense)
Excise duty input account is used to set off the liability so the account is credit with the closing balance for the month of March.
After adjusting Rs.1,00,000/- the balance of Rs.50,000/- should be paid by bank.Due to payment there will be decrease in bank balance and outflow of cash from business. So, as per Real account rule (Bank) "Credit what goes out of business"(current Asset)
NOTE:- EVEN WE CAN ADJUST SERVICE INPUT AGAINST EXCISE DUTY OUTPUT