capital includes

This query is : Resolved

Report Abuse Follow Query Ask a Query

Guest

Guest (Querist)

29 December 2009 capital includes only cash and bank..items or other asset?

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
Follow

29 December 2009 Capital means amount invested by the proprietors in a business. Now one can invest in any shape i.e. cash, bank, goods, furniture and building etc. For example you want to start your own jewellery shop and you put in your shop your personal jewellery as stock. Now the value of your personal jewellery will be your capital.

Guest

Guest (Querist)

29 December 2009 thanks,,

suppose if a person starts busines..with some cash and other assets as capital for his business...?such investments are chargeable to tax (if he is filing return first time)..as an individual...
as source of such cash and assets need to be disclosed?

Upgrade to CAclubindia Pro. Subscribe Now!

Guest

Guest (Querist)

29 December 2009 if we add any capital asset to a business ,then will we have to pay tax on that addtion of asset?

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
Follow

30 December 2009 No, you would not be required to pay any tax if you add any capital asset to the business. Let us take two situations, i. you buy a capital asset from the money you have already introduced in the business. Now in this case you have just changed your cash into a capital asset, you have not earned any income, so why you shall pay any tax. 2. If you introduce your own building in the business, even in this case you have not earned any money, since one cannot earn profit from oneself.

Guest

Guest (Querist)

30 December 2009 thanks...to u..
i accept ur answer...but sometimes..in mid of the business..or lets say..in a running business...if we add some capital assets of huge amts..without change in cash/bank..
then one will have to disclose the source of money where it comes?otherwise it is treated as undisclosed income..

and also guide me about when we prepare a capital a/c and b/sheet of an assessee ..first time..then how to do it..like opening balances of assets liabilities...

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
Follow

31 December 2009 Actually whenever you introduc any cash/asset to the business you will always have to Debit the Asset A/c and Credit Proprietor/Creditor/Lender A/c. This means you are disclosing wherefrom money has come. For example if you credit it to Capital A/c (Prop. A/c), then at the time of Assessment, the Income Tax Officer can ask you the source from where you received the money.
As far as preparation of Capital A/c and B/S is concerned, it is no problem if you are maintaining proper books. Don't hesitate to ask again if any doubt.

Guest

Guest (Querist)

31 December 2009 thanks sir,,,

now 1 more question..
suppose if i am starting a business and i am itroducing 1 crore of rs as capital in through cash /bank...its a very huge amt...
then what happened ...how an assesing officer/i.t dept can consider it..?will i have to pay tax on 1crore capital?

Upgrade to CAclubindia Pro. Subscribe Now!

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
Follow

31 December 2009 One has to pay Income Tax when one earns income and not when he invests the already earned income. So if you are investing 1 crore in business you must have a) either got it from your parents who must have paid tax over it, if it was taxable, otherwise not. They can always loan it to you. In that case you need not worry about it. b) If you have earned it and have already paid tax even then you need not worry while investing it in your business. If you have not paid not tax then you will have to explain how it is legal money, that means that no tax was payable on that. I hope it is now clear. Don't hesitate to ask if still the doubt persists

Guest

Guest (Querist)

31 December 2009 thanks...

now from ur answer ,it means that its all upon adjustment of that investment...c.a 's of clients shows that investment is a legal way..by way of a loan...of from drawings for ..personal use..is it true.na...?

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
Follow

01 January 2010 Yes, definitely you have to show that whatever you have invested is legal money. For that you need to have evidence. Only then the Assessing Officer will be convinced.

Guest

Guest (Querist)

01 January 2010 thanks sir,,,what about ur work?r u a practising c.a?.....

Upgrade to CAclubindia Pro. Subscribe Now!

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
Follow

01 January 2010 I am a Cost & Works Accountant (CWA) teaching at Vishveshwarya School of Business Management, Dadri.

Guest

Guest (Querist)

07 January 2010 sir,
what is finalisation of accounts and accounts books?what we do in finalisation? for company and other concerns...

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
Follow

08 January 2010 Finalisation of accounts or accounts books means preparation of Trading and P&L A/c and Balance Sheet. In case of companies format is provided for B/S in Schedule VI of Companies Act. But in case of proprietorships or partnerships there is no restriction etc.

Upgrade to CAclubindia Pro. Subscribe Now!

Guest

Guest (Querist)

08 January 2010 plz suggest me books on accounting entries for book keeping...for companies/others..that are available in market ..to enhance my knowledge in accounts....

Jag Bhushan Sharma

Jag Bhushan Sharma (Expert)
Follow

11 January 2010 Sumitji, by the way what is your qualification and what are you doing. It will be better if your start with 'Double Entry Book-keeping' for XIth class by T.S. Grewal (Sultan Chand and Sons). This is the basic book and later on for corporate accounting you may refer to J.R. Monga's Book.

Guest

Guest (Querist)

13 January 2010 actually , i am a c.a final year student..
waiting for results..and for taxation point of view i asked these questions..anyways now u have solved all my queries..actually theory and practical both are different in accounts....actually i am confused about routing of money..from taxation point of view..
and

Guest

Guest (Querist)

28 May 2010 hello sir how ru?