Sinoj Varghese (Accountant) (44 Points)
27 July 2018Hi
I have a small doubt and please explain the solution in regards to ICAI guidance notes: https://www.in.kpmg.com/ifrs/files/The_ICAI_issues_a_guidance_note_on_accounting_for_derivative_contracts.pdf
And my query is whether Call Option Premium paid by a buyer/holder is expense or liability in his books of accounts?
RAMESH PATEL
(STUDENT)
(93 Points)
Replied 27 July 2018
Sinoj Varghese
(Accountant)
(44 Points)
Replied 28 July 2018
| Originally posted by : RAMESH PATEL | ||
 |
call option premium paid by buyer is for the benefit or option to purchase the derivative at any price.so as per ind as 103 it is an asset for call buyer.the entry should bederivative asset Dr to bank |  |
https://www.quora.com/Can-anyone-help-me-with-accounting-of-future-and-option
(i) Accounting at the inception of a contract: The seller/writer of the option is required to pay initial margin for entering into the option contract. Such initial margin paid would be debited to ‘Equity Index Option Margin Account’ or to ‘Equity Stock Option Margin Account’, as the case may be. In the balance sheet, such account should be shown separately under the head ‘Current Assets’. The buyer/holder of the option is not required to pay any margin. He is required to pay the premium. In his books, such premium would be debited to ‘Equity Index Option Premium Account’ or ‘Equity Stock Option Premium Account’, as the case may be. In the books of the seller/writer, such premium received should be credited to ‘Equity Index Option Premium Account’ or ‘Equity Stock Option Premium Account’ as the case may be.
If we follow the above notes the entries will be as follows
1. Capital brought into business
Bank Account Dr 100000
To Capital Account Cr 100000
2. Transfering the amount to Demat Account
Axis Direct Account (Sundry Debtor) Dr 50000
To Bank Account Cr 50000
3. Bought NIFTY 11000 CE @ 75*300 Expiry August 30 2018
Equity Index Premium Account/Derivative Asset Account Dr 22500
To Axis Direct Account Cr 22500
4. Exercising/Closing the position for a margin NIFTY 11000 CE @ 75*360 Expiry August 30 2018
Axis Direct Account Dr 27000
To Equity Index Premium Account
How the above practice will help me compute FNO turnover for the purpose of Income Tax?
CAclubindia
