10 November 2007
Cash system means accounting on cash basis. Whatever you receive is your receipts. What do you mean by excess fees? If you are a CA or a Solicitor you can treat it as Advances. Please clarify how client has paid you excess?
10 November 2007
No.excess amount received to be shown as income.If you are not showing it as income,basic assumption is cash systme of accounting get vanished.
10 November 2007
If you are not having Client Account then there is no question of Advances. Entire cash is your income and that is the basic meaning of cash system.
12 November 2007
Our client, a consulting engineer,received Rs. 10000/- extra from one of his client by mistake,later, after the Balance sheet(BS) date it was duly refunded to the client but as of the date of BS it was in the books.Hence the necessity to show it as Current liability.Basically, the amount which you have received,if it is not your income,the principles of cash system are not attracted to that amount,it is, no doubt a receipt but not an income.As per cash system of accounting we account for only the items of income and expenditute as and when it is realised in cash.Hope this logic finds favour with the experts.Thanks for the replies.
Your client is a Consultant. He has received excess money which was rectified and refunded then the substance of the transaction is why did he recieve? Our answer is by mistake. In this case, Accounting always allows rectification. You have correctly refunded and closed the entry. In the taxation it is never an income as it is not earned neither recieved in advance with a view to provide service. As regards accounting, since he has no client account he should treat it as Current Liability and return it. In this case, remember if these transactions are frequent then they lead to suspicion and hence with all due respect I request you to take care. I hope things are resolved. Once again I repeat that if there is CLient Account then you can treat it as Advances and progressive billing can be done.
13 November 2007
Dear Kapil,Thanks for your concern that the type of transaction should not be frequent so as to arouse a suspicion.In my practice of 15 years I have come across such a transaction only once this year for a client of mine amongst many.So far as having a client account,I differ with you that once you have a client account,you are not maintaining your accounts on cash basis it will become Mercantile and we are discussing cash system of accounting !Hence there is no question of showing this amount as Advance.Your question why did he receive excess in the first place can be answered as a simple mistake for which the business people always us E & O E which means errors and ommissions excepted that means errors are to be given and taken by both the side an allowance.Thanks for your replies those are really enlightening and enjoyable.Happy Diwali though belatedly.
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