About account entry

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Querist : Anonymous

Querist : Anonymous (Querist)

04 October 2013 I got some equity share as gift from my mother so what will be its entry in ours book

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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04 October 2013 investment in shares a/c...dr
to capital a/c
as there is no cash/ bank outflow it will increase your capital.

Ganeshbabu K

Ganeshbabu K (Expert)
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04 October 2013 Dr.Investment in Shares A/c
Cr.Gifts received(Indirect Income)A/c[value]

Being gifts received from mother(xx no.s shares)
.
.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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04 October 2013 there is no income here its a direct addition to asset in the form of shares the entry give by ganesh babu is wrong.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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04 October 2013 Both the treatments are correct. Final effect will also be same.

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CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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04 October 2013 My view is, crediting the capital account is more appropriate accounting treatment

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CA Pallav Singhania

CA Pallav Singhania (Expert)
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04 October 2013 Agree with Mr. Sampat,

crediting Capital A/c would be more appropriate...

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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05 October 2013 Sanjay sir if u say that ganesh babus entry is correct then you not following the accounting principle and technically if shares are assets then how come it can be an indirect income??????????

since sharesfulfill the defintion of "asset"
then it cannot be first taken to indirect income though later it will be transfered to capital a/c.

the question is not of final effect , the question of reflecting true and fair view of accounting and following correct accounting treatment.
hence ganesh babu's entry is fundamentally only wrong.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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05 October 2013 Dear Tushar please say which accounting standard has been violated.

Shares are Investment but when these are received as gift without any consideration then such gift is an Income and shown as Gift Received under Indirect income.

Ganeshbabu you could have proved your point by citing the example of Shares received as gift from non relatives amounting to FMV more than Rs 50000/-. If FMV of shraes receved from Non relative is more than Rs 50000/- than the entire amount is taxable. So what would be the entry in that case?

You have to show the entire amount as Indirect Income and pay Tax on it. So no way you can show direct transfer to Capital A/c.

The amount will be shown as Indirect Income. Anything received as gift is Income to the Assessee.

When gifts are tax exempted a direct entry gto capital account is also passed but passing the entry as suggested by Ganeshbabu is also correct and is not in violation of any accounting Principles.

I stand with my view that both the entries are correct. Please seek any further clarification if required.

Awaiting your replies.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 October 2013 Firstly dear sanjay gupta accounting treatment and tax treatment are different aspects and you cannot mix it at time of booking enrty.

Follow AS 13 it is in respect of "Accounting of Investments" and nowhere it has even mentioned that gifts should be first transferred to indirect income as there is no income at all infact income will be earned from such gifted shares and shares are asset as per the definiton by ICAI -can also refer accounting principle on booking assets in books of accounts.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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07 October 2013 Dear Tushar please tell where is accounting standard it is written that if you get an Investment without any consideration then the said gain will not be passed through P/L account.

Also please state the entries which you will pass when the Shares are received from Non Relative with FMV more than 50000/-.

Tax Treatment and Accounting treatment are not same but the concept is same. Also state any deviation from Accounting Principles/Standards with proper extracts of the said principle/standard based on which you have said that the entry as suggested by Ganeshbabu is wrong.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 October 2013 my answer to your question is simple tell me whether shares are assets or not?
if yes the simply it cannot go to indirect incomes as assets are those resources which are owned by entity and with the intention to earn revenue from it.

Tax treatment is not to be invoked while passing any accounting entry so lets not debate on it.

shares received from non relative are to be shown under investments only and if there is no cash outflow then capital account is appropriate.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 October 2013 For more details pls refer the whole treatment of shares and its accounting concept under AS 13- "Accounting for Investments"

Hope all your doubts will be clearifed!

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 October 2013 Shares A/c are real accounts as classified under accounting concepts, principles and accounting conventions.

All real accounts never got to Profit and loss a/c.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 October 2013 Most imp u justify how it is an indirect income????

i showed it how it is an asset as it falls in definition of assets.

Moreover only items of exp, provisions and income are respectively debited and credited to profit and loss a/c......

so when it not an income only then how it can go to profit and loss a/c thus in the light of above explanation it is appropriate to credit capital a/c.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 October 2013 Also refer AS -14" Accounting for amalgamation"
where shares are not given for cash and shares are credited to transferor company's shareholders a/c.

for details accounting pls refer book by DS Rawat it has mentioned many eg on this.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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07 October 2013 Dear Tushar you are mixing it up.

See the entry.

Investment in Shares A/c Dr

To Gift Received.

Here Shares are not going to P/L, Shares are going to balance sheet only. The gain part is being shown in P/L A/c...So dont get confused.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 October 2013 sir im not getting confused,
indirect income is also written besides gift received a/c.
To my knowledge indirect incomes never goes to bal sheet, it goes to profit and loss a/c

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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07 October 2013 Are bhai...

Investment is going to Balance Sheet

and Indirect Income (Which is Gift) is going to P/L Account.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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07 October 2013 sir pls understand even if its gift it is not an exp nor an income as it doesnt fall in ambit or definition of income , sir u can ask any1 as it is an asset received in gift without consideration, assets never first go to P&L fundamentally speaking.

Ganeshbabu K

Ganeshbabu K (Expert)
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07 October 2013 No problem with any accounting standard or principle,,if it is let me know with para no.
.
.
And my intention in writing by entry was,, i want to show that shares received was gift(income),, and indirect income,,
.
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my entry will give effect as below
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Asset side increased with investment
.
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Once you transferd the profit(gifts recd) to capital it will added back to capital,,which consequently increases liability side
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Hence the effect would be same
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No need to break our heads with this however it is individual and it is fine with any of the above entry,,only difference of opinion...but effect of both will be same and enough for individuals book keeping
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only difference is tushar ji has given credit directly to capital account
.
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i showed it as income(gift from relative is exempt from tax,and need to disclose in income tax return)how can you say there is no income?

and later transfered to capital which i feel more appropriate
.
.
Thanks..

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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07 October 2013 My question still unanswered:

1) Which accounting Principal/Standard has been violated or which para of the said standard has been violated. I have checked both AS-13 & AS-14. In fact both AS-13 & AS-14 are not related with treatment of Gift.

2) What will be the entry when Shares received from non relative with FMV more than Rs 50000/-.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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08 October 2013 your focus is on gift but mine is on shares the difference is here only sanjay sirjiiii!!!

i have already ans both the question above which you dont want to digest that i can understand!!!

good ganesh babu has said no need to break our head.so just need to follow him.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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08 October 2013 For breaking more heads(as ref by ganesh babu) pls refer the following link also, hope more head breaks after reading this.

https://www.caclubindia.com/forum/accounting-treatment-of-gift-34974.asp#.UlKsB9JHJe4

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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08 October 2013 Dear Tushar my focus is on both the aspects.

Link seen. I never said that your treatment was wrong. But the entry as suggested by Ganeshbabu is not wrong, too. I gave all explanations in support of my answer. If you want any type of clarification then i am ready to explain. I still can not understand why you think that the entry suggested by Ganeshbabu is wrong?

Ganeshbabu K

Ganeshbabu K (Expert)
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08 October 2013 1)I refered the link attached above,,I didnt found any great discussion there,They also given their opinion.
.
.

.
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2)Kindly reply tushar ji with the extract of accounting standard,principle that i have violated(As you declared my entry as wrong as per AS,AND PRINCIPLES)
.
Thanks...

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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08 October 2013 Pls go to icai and ask them they may ans ur query.
and they conversation was with mr sanjay gupta.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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08 October 2013 The link i didnt mentioned for u, as u never like others work so no need to even refer it.
you think ur god and u only know everything on this planet...

CA Pallav Singhania

CA Pallav Singhania (Expert)
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08 October 2013 Both Entries are correct in my view,
But Tushar ji's entry is more appropriate..
as the gift of shares was made by the mother..
If the gift were received from non-relative then I think Tushar ji answer will be in question...

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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08 October 2013 Dear Tushar please behave like a professional. Arguments and deliberation are not bad. Its exchange of views and knowledge. No one is perfect. Each person has his opinion but the same should be properly supported with logic and principles.

You should not say that go and ask ICAI to anyone. Please end this here as this is taking a bad shape.

I QUIT.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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08 October 2013 sanjay sir i agree with what u said but its the trademark way how mr ganesh babu -vely critisizes others not on the basis of knowledge u can have many person on cci having same exp for him and sir the above conversation was with u not with him.

Ganeshbabu K

Ganeshbabu K (Expert)
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08 October 2013 1)Thanks for advising me to go ICAI...i cannot pay Rs.5000 to ICAI expert committe AS OF NOW,,So i am not in a plan to go ICAI.

2)I always like,& Respect,Appreciate Quality work..You may noticed me wrongly...or i may be wrong.

3)Thanks for acknowledging me as GOD,,Yes..

4)unable to find reason for your Angry..which just arises when You replied that my entry is wrong with accounting standard&principle,,i just asked which accounting standard was suffered with my entry
.
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i asked this with a curosity to know where i did wrong..i am not resposnible if you feel this as wrong as i just asked you on what basis you said my reply was wrong..
.
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Thanks for all.i taken my questions back,,i dont need any explanation from you why my reply is wrong.
.
Finally thanks again for acknowledging me as GOD and noticing my trademark way...
..
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I am stopping reply in this thread just to thank tushar ji for his kind appreciation..And respecting CCI EXPERT THREAD RULES

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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09 October 2013 No need to thank firstly i am not interested in giving any explaination to you nor im accountable to you in whatsoever manner.....
how much u respect others that we have seen in your ans....no need to explain....

no need to even thank read properly what i wrote...i hvent mentioned u as "god" (as wrongly interpretted by you) i have written "you think that your are god....i hvent refered to you as god.....no need to thank me...

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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10 October 2013 First of all; let me "change" the mood of all.
.
.
Two different feelings for the same happening :
.
Parents get tensed seeing fights
between their children.
.
Grand Parents enjoy the same.

-------------------------------------------------

Here I see some got annoyed who were
participating in the discussion
and
others were enjoying without "clapping."

:D

-------------------------------------------------

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CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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10 October 2013 In the past; many used to gift OUTSIDERS and the "amount" was directly credited to the Capital Account.
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At that time the definition of relatives was not required.
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Now Act defines who are your relatives.
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( In reality; the situation may not be so - we had experienced how two Ambani brothers "behaved" with each other in the past).
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Coming back -

In those days; there was no need to show the Gift in the Profit and Loss Account which is now-a-days have come into practice due to amendments in law.
.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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10 October 2013 A property may come into the hands by way of either a gift or will.
.
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In both the cases; the cost is NIL to the receiver.
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Now the "participants" are required to answer what would be the treatment in Accounting when the property comes into the hands of the receiver through a will.
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Hope you will get the right answer automatically.
.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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10 October 2013 THE FUNDAMENTAL CONCEPT :
.
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If something is INCOME (direct or indirect) for one then generally it is accepted that it is EXPENSE for the other.
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Example :
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Salary is income for the salaried person and expense for the employer.
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Right?
.
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Can we say "donor" has made any "expenditure" if he has "gifted" his property to someone?
.

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CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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10 October 2013 THE FINAL QUERY :
.
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Whether the "donor" will show the same as "indirect expenditure" in his books?
.
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My above "query" may be treated like a GIFT to the readers. :)

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CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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10 October 2013 THE CONCEPT IN INCOME-TAX :
.
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When the "gifts" are not flowing from the relatives; means these are "adjusted" income of the assessee and the same should be assessed to tax.
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In the past; many assessees took undue benefit of provisions of GIFT TRANSACTIONS.
.
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To curb such practices; the term "relatives" has been defined.
.

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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10 October 2013 SIXER ON THE LAST BALL :
.
.
A "GIFT" emerges due to "natural" love and affection.
.
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Hope the members of CACLUB
will have natural love and affection
with each other - FOREVER.
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(They are part of a big family CACLUB hence RELATIVE TO EACH OTHER).
.
Enjoy the fight...but come together back.
.
Read my first post again.

:)

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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10 October 2013 Finally. Four years it took to find a real fight in this forum. This is much better way of learning new things except for a few wrong words used here and there.

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CA Pallav Singhania

CA Pallav Singhania (Expert)
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10 October 2013 INDIA WON THE 1ST T20 AGAINST AUSSIES

CHEERS...

:) :) :) :) :) :) :)

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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11 October 2013 Surendra sir 1 request to you...just need a last clear cut accounting entry which is correct as asked by the queriest so that at last all becomes well ...

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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11 October 2013 in case of assets get devolved through will then it is as good as capital introduced but without any flow of cash directly in business but by way of inheritance and in such case in my view still it will go to Capital a/c only...

Conclusion for the entry will be..
Investment in Shares a/c...Dr
To Capital A/c.

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CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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11 October 2013 @ Tushar,

Please read carefully all my posts.
.
From the above; it is crystal clear that your accounting treatment is 100% accurate.
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What others are following is now acceptable according to the amendments made in the income tax and majority are concerned with Income-Tax. Otherwise many are not "interested" to maintain books of account.
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However; it is also true that we are supposed to maintain books of account on the basis of ACCOUNTING STANDARDS; and not as per Income Tax Act.
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Various "WEIGHTED" deductions, non-deduction of expenses, allowances etc. are taken into account while preparing the TAX RETURNS hence BOOKS OF ACCOUNT can never give the results which will directly give the AMOUNT OF GROSS TOTAL INCOME.
.

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CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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12 October 2013 Thank you sir for your valuable comments and i fully agree with what you said.