Question

A firm get an order to supply of goods on 10th July supplies the goods on 15th July and received the cash on 19th July. So revenue will be deemed to be earned on which date and which principle is applied here? Explain it​

Answer 1

Explanation:

The time of supply of goods shall be the earlier of the following dates:

 (a) The date of issuing of invoice (or the last day by which invoice should   have been issued)

OR

(b) The date of receipt of payment

-whichever is earlier

If the supplier receives an amount up to Rs. 1000 in excess of the invoice amount, the time of supply for the extra amount shall be the date of issue of invoice (at the option of the supplier).

For (a) and (b)- The supply shall be assumed to have been made to the extent it is covered by the invoice or the payment (as the case may be).

For (b)- the date of receipt of payment shall be earlier of-

1. The date on which he entered the payment in his books

OR

2. The date on which the payment is credited to his bank account

Example:

(a) Date of invoice 15th May 2018

(b) Date of receipt of payment 10th July 2018

(c) Date when supplier recorded receipt in books 11th July 2018

Time of supply will be 15th May 2018

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