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Expense by director

Narinder Kumar (Student CA Final ) (32 Points)

24 May 2016

IN PVT. LTD. CO. THERE ARE TWO DIRECTOR, ONE DIRECTOR ENGAGED IN BUSINESS OF COMPANY AND ALL EXPENSES LIKE TRAVELLING , PURCHASE ,ETC.PAID BY CREDIT CARDIT (PERSONAL NAME) AND ALL THE INVOICES OF EXPENSE IN THE NAME OF DIRECTOR. IS IT ALLOWABLE EXPENSE UNDER INCOMETAX ACT AND WHAT IS ACCOUNTING TREATMENT IF ALLOWED?

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5 Replies

vineet kumar (Student CA IPC / IPCC) (85 Points)
Replied 24 May 2016

Allowable expenses must genuinely be incurred “wholly and exclusively” for the purpose of the business. thus it is allowable expenses.

Accounting entry should be

1) expenss A/c Dr.

to Director A/c

2) Director's A/C Dr.

to Cash/bank A/c

Note : Director should be shown in the head of current liability in Balance sheet. if expenses incurred by director from his persional accomunt.

thanks

Vineet Kumar

7770010353

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Narinder Kumar (Student CA Final ) (32 Points)
Replied 24 May 2016

THANKS

Narinder Kumar (Student CA Final ) (32 Points)
Replied 24 May 2016

THERE IS CREDIT BALANCE OF DIRECTOR IN F.Y 2014-15.

1. IS THERE ANY LIABILITY TO PAY INTEREST TO DIRECTOR BY COMPANY ?

2.AND WHETHER SUCH INTEREST IS SUBJECT TO TDS.?

vineet kumar (Student CA IPC / IPCC) (85 Points)
Replied 01 June 2016

No specific provision in the company act 2013. to pay interest on the expenses maid by director on behalf of company. if company pay interest on the outstanding amount, then TDS applicable U/S 194(A) @ 10% in case of amount of interest excess of Rs.5000.

thanks

Vineet Kumar