In case of advertising firms, they buy the slot from the Newspaper company and then resell that space to the client. The space of that specific newspaper is purchased based on request from the actual buyers who want to post ads.
In this case the sales is done first, often the clients also ask for discount and the discount has to be given from the re-seller’s share. let us say If I am the reseller and my commission is 15%, then if a space costs 100Rs,( service tax-12.36% extra) then out of this 112.36, my share is 15 Rs. and the remaining 85 Rs is the newspaper’s share. If I give a discount of Rs 2 it has to be out of this Rs 15.
Now the cost of the space is also determined by the space that is occupied that is per sqcm. let us say the / sq cm cost is Rs. 90.
Case:- A person “CLIENT A” wants to post an ad through Deccan Chroni and this is being done through an ad agency.
first let us create a client ledger who wants to post an ad through us,
Now let us say that a discount of 5 % is given to the client A. As discussed above this discount will be shared from the reseller’s profit.
Now there is an important concept that the service tax is chargeable only on the 15% that is the reseller’s earning. The reseller will not charge service tax on the discounted amount.
first let us create a sales ledger with discount for the CLIENT A. here we have an item space by the name of Deccan Chroni and say the space being bought is 30X20 sq cms. there fore the cost being 600 sqcm. The actual cost being 600 X 90 = Rs. 54000.
The qty field is sqcm. when the sales voucher is prepared as
be careful of the service tax break up and as reseller’s share is 8100, service tax is being charged on that amount only.
Press ALT-P and Press Yes,
Now the Bill is obtained as :-
Let us see the Profit & Loss Account , the sales through Deccan Chroni reflects 54000 and shows that total sales have been worth Rs. 54000
Now we also need to make the payment to Deccan Chroni (after deducting the commission) for this we need to pass a journal which shows the commission earned and also gives the outstanding due of the creditor.
for this we pass a journal which gives us the perfect presentation of the current business scenario.
In this the commission has to be earned as 15% of Rs. 54000 & can be calculated by either ( ALT-C) or can be calculated in the calculator pane. the remaining amount is to be given to the Deccan Chroni
Now the P&L Account shows –
Commission earned as 8100 – discount given ( 2700)=5400 is the profit.
*Note we do not want to show any Purchase or Sale as that would not reflect the correct picture.
Now we see the reports, for Client – shows the Dr. amount receivable from the client( D –>S–>O–>G)–> Debtors
Now we see the reports, for Decccan Chroni – shows the Cr. amount payable to Deccan Chroni ( D –>S–>O–>G)–> Creditors
Just to re-confirm you can recheck the balance sheet to see that your business is reflected perfectly.
Because any business’ true picture is reflected by its balance sheet.
now we make the payment to Deccan Chroni as ,
and then make a bill settlement using ALT-B.
Finally we get the Balance sheet as required, here we see that under sundry creditors no amount is being reflected, as the payment has already been made to deccan chroni. Since we have received the amount from the client it still shows sundry debtors under Assets as Rs. 52301.
The profit is reflected as Rs. 5400 in BS and in the P&L account.