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How to deal with this accounting treatment

Mukesh Bhaiya (Manager- Accounts) (119 Points)

15 May 2011

I had purchased a car from the dealer in the name of the firm for9,00,000. But due to some manufacturing defect i had returned the car and replaced another car for8,00,000. In all the dealer has to return1,00,000 in the name of the firm. But the dealer has given a cheque in one of the partners name due to which the capital account of the partner has increased. what should i do now because the car is in the name of the firm. What will be the accounting treatment so that the partner's capital account is not increased and the amount in the car A/c should be decrased by1,00,000.

Thanks

Mukesh

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13 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 16 May 2011

You can pass the following JV to give the effect:-

Parner's Capital A/c Dr. 100000

To Car A/c 100000

(Being value of car adjusted with the Capital of Partner)

Regards,

Devendra

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Mukesh Bhaiya (Manager- Accounts) (119 Points)
Replied 16 May 2011

Even i thought of the same entry.But there is no supporting document for the same.

Jag Bhushan Sharma (Faculty in a B-School) (633 Points)
Replied 16 May 2011

The forwarding letter which the partner received from the car dealer must contain on what account this payment is being made. It will become an evidence. If it is not available, get it from the car dealer and pass the entry given above.

CA Rakesh Garg (Asst. MGR Taxation) (510 Points)
Replied 16 May 2011

hello everyone.

i m also go wid sharma ji and devandra. this is a enforable entry and evidence is also right.

1 Like

Mukesh Bhaiya (Manager- Accounts) (119 Points)
Replied 17 May 2011

What if the car is taken in the name of the partner,but i want to show it in the name of the firm for claiming depreciation expense. What is the procedure then

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Jag Bhushan Sharma (Faculty in a B-School) (633 Points)
Replied 19 May 2011

I don't think you can claim depreciation, if the car is in the name of partner.

Mukesh Bhaiya (Manager- Accounts) (119 Points)
Replied 19 May 2011

But there may be a way to transfer the car it in the name of the firm.

satish kumar sharma (CA FINAL) (36 Points)
Replied 19 May 2011

supporting can be innvoices of both the cars and debit note in the books of dealer

satish kumar sharma (CA FINAL) (36 Points)
Replied 19 May 2011

pass entry of

car a/c dr

to partner's capital a/c

to cliam depreciation

CA Rakesh Garg (Asst. MGR Taxation) (510 Points)
Replied 20 May 2011

as per rule, u cant allow the depreciation, if it is taken by partner by his name. depreciation is allowable only if it has taken in firm name.

no legal procedure for taking depreciation when car named wid partner

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U S Sharma (glidor@gmail.com) (21056 Points)
Replied 20 May 2011

Originally posted by : mukesh bhaiya
	I had purchased a car from the dealer in the name of the firm for9,00,000. But due to some manufacturing defect i had returned the car and replaced another car for8,00,000. In all the dealer has to return1,00,000 in the name of the firm. But the dealer has given a cheque in one of the partners name due to which the capital account of the partner has increased. what should i do now because the car is in the name of the firm. What will be the accounting treatment so that the partner's capital account is not increased and the amount in the car A/c should be decrased by1,00,000. Thanks Mukesh

simply partner will issue a cheque in favor of firm, it will neutralize the partner's bank account, and firm will reduce the value of car with the cheque received, for reference to the value reduction, the firm will have to have 1) xerox copy of cheque received from the dealer in name of partner, 2) letter of refund 3) credit note 4) correspondence in relation to exchange of car.

Jag Bhushan Sharma (Faculty in a B-School) (633 Points)
Replied 20 May 2011

There is no way you can claim depreciation on the car owned by the partner. If partner sells the car to the firm, then of course the firm can claim depreciation from the date the car is transferred in the name of firm.