23 February 2023
hi real estate co party book a flat rs. 4500000/- after registration snd stamp duty party resale a flat another person half payment of flat first party pay half payment first party say second party pay to you [ we do deed of confirmation ] then what is accounting system [ both party mutual standing payment part ]
06 July 2024
In the scenario described where there's a resale of a flat and a deed of confirmation for mutual payment arrangements between parties, the accounting treatment typically involves recognizing revenue and costs as per the stage of completion method. Here’s how you can approach the accounting entries:
1. **Initial Sale to First Party**: - When the flat is initially sold to the first party for Rs. 45,00,000 after registration and stamp duty, you recognize revenue for the full amount received. The entry would be: ``` Bank Account Dr. Rs. 45,00,000 To Sales Revenue (or Flat Sales) Cr. Rs. 45,00,000 ```
2. **Resale to Second Party**: - When the first party resells half of the flat to the second party, typically, the accounting for the resale itself involves recognizing revenue for the amount received from the second party. Let's assume the resale amount is Rs. 22,50,000: ``` Bank Account Dr. Rs. 22,50,000 To Sales Revenue (or Flat Sales) Cr. Rs. 22,50,000 ```
3. **Deed of Confirmation**: - The deed of confirmation for mutual payment arrangements suggests that the first party will pay the remaining half of the payment to you (the real estate company). This part usually involves adjusting the revenue recognized earlier and recognizing the remaining amount as revenue when the payment is received. - Assuming the first party pays the remaining Rs. 22,50,000 to you, the entry would be: ``` Bank Account Dr. Rs. 22,50,000 To Sales Revenue (or Flat Sales) Cr. Rs. 22,50,000 ```
4. **Adjustment and Cost Recognition**: - Since the real estate company is involved in the transaction, there may be additional costs such as administrative fees or legal charges associated with the resale or the deed of confirmation. These costs should be accounted for separately as expenses: ``` Administrative Expenses (or relevant expense account) Dr. Rs. XXXX To Bank Account (or relevant payment method) Cr. Rs. XXXX ```
5. **Stage of Completion Method**: - If the real estate company follows the stage of completion method for revenue recognition, revenue is recognized based on the percentage of completion of the project or unit sold. This method ensures that revenue is recognized as the project progresses or as the obligations under the contract are satisfied.
6. **Documentation and Compliance**: - Ensure all transactions are properly documented, including agreements, deeds of confirmation, and invoices. Compliance with accounting standards (like Ind AS or AS) and tax regulations is crucial.
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