1 The accounting treatment for compensation to the buyer due to product quality is as follows:

Borrow: non-operating expenses

Credit: other payables

Debit: Other payables

Loan: bank deposit

2. If the sales before the balance sheet date have quality disputes on the balance sheet date, and the compensation conforms to the provisions of matters after the balance sheet date, then the accounting treatment is as follows:

Borrow: non-operating expenses

Loan: estimated liabilities

3. If the seller expects that this indemnity can be compensated from a third party, the estimated amount of compensation will be included in non-operating income.

Can quality indemnity be deducted before income tax?

Quality indemnity can be deducted before income tax.

According to the relevant provisions of the Enterprise Income Tax Law of the People's Republic of China:

Reasonable expenses actually incurred by an enterprise related to income, including costs, expenses, taxes, losses and other expenses, are allowed to be deducted when calculating taxable income.

Therefore, the liquidated damages and compensation paid in economic transactions can be deducted before income tax.

Received supplier quality compensation entry

Debit: accounts payable

Loan: non-operating income

In practice, there is also a reduction in inventory costs.

However, it is necessary to distinguish the nature of compensation expenses. If compensation expenses are paid in violation of purchase and sale contracts, they are generally recorded in accounting subjects such as "management expenses" or "sales expenses" respectively.

Compensation expenses unrelated to production and operation should generally be recorded as "non-operating expenses". According to the financial system, compensation expenses should be recorded as "non-operating expenses".

However, according to the provisions of the tax law, when declaring enterprise income tax, the compensation fee should be increased in the tax return, and pre-tax deduction is not allowed.

Non-operating income refers to all kinds of gains confirmed by enterprises that are not directly related to their daily activities, mainly including non-current assets disposal gains, government subsidies, inventory gains (cash), donation gains, non-monetary assets exchange gains, debt restructuring gains, accounts payable that cannot be paid, etc.