We are a small mail order company, and our income comes obviously from sale of goods. Sometimes the courier loses a parcel, and they pay out on their insurance. They do not issue a credit note, just a remittance slip. Is this classed as income, is vatable, etc - basically I don't know how to account for it.
It is not income that is vatable. The courier is just paying for the goods that are lost. A fair presentation of the accounts would be to show what the position of the business would be if your courier did not lose the parcel. Only the original sale to the customer is vatable.
I would set up another account in the trial balance to track the income. I would use this to offset cost-of-sales, distribution costs as I presume you send another parcel to the customer and the cost is charged to these accounts.
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