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Shall I put PPF in expenses and shift it to asset at year end?

05 July 2020

Hello,

I am an engineer and creating my books of account. I am not very well versed with accounting topics. In account creation I have a simple question.

While creating my books of account shall I keep PPF inside both Asset and Expenses and shift PPF at year end from expenses to Asset? I think this is not the correct way and correct way should be to keep PPF inside asset only. Problem with this approach is using Balance Sheet or P&L account I cannot get my current year investment towards PPF, so these two documents are not sufficient to file my income tax.

Please suggest me on how to arrange this account.

Thanks & Regards,

Siddharth

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5 Replies

CA Raj Doshi (Practising CA) (8924 Points)
Replied 05 July 2020

Keep PPF in asset side.

While preparing the balance sheet in excel, mention PPF closing balance in below format.

opening balance
add investment during the year
add interest on ppf
less withdrawal from ppf
closing balance.

so in this way your balance sheet would shown ppf investment for tax filings also.

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siddharth jain (29 Points)
Replied 05 July 2020

I use few software to create my balance sheet like GNU Cash and Wave Accounting.

For Balance sheet they provide details of each of the account closing balance only and there is no way to show all these entries separately mentioned by you. Further, None of the 4 reports - Balance Sheet, P&L Account, Cash Flow Statement, Trial Balance show such entry.

Only way to do this is to attach PPF/LIC Investment Ledger separately. Is there anything in the standard reports which provides such functionality? How does general accountant/CA handles such situation? I have even gone through some of the standard balance sheet they don't have such breakup.

Thanks & Regards,

Siddharth

CA Raj Doshi (Practising CA) (8924 Points)
Replied 05 July 2020

A General Accountant/CA has a set of checklist before finalizing the return. And the deduction under 80C is checked manually by opening the said ledger in the accounting software to know the amount invested.

Yes, softwares dont provide this because financials are drawn based on importance to the user of financial statement.

For you, showing the detailed PPF note is important. Others it wouldn't be.

The method I suggested is only to cater to your needs. You could call it a balance sheet customised to your specific disclosure needs.

Sending ledgers separately is also acceptable.

You could even put this detailed note below the balance sheet.

Everything is ok till the time it catches the attention of the tax return preparer and he mentions it correctly.

siddharth jain (29 Points)
Replied 05 July 2020

Thank you Raj. This answers my question. Going forward I would attach PPF and other account ledger along with my balance sheet.

At first I was not sure about whom should I ask this question. However, over the years CAClubIndia posts has helped me a lot in understanding about the accounts. This is the first question asked by me in any forum related to accounting and I am grateful to get the quick answers.

Thanks once again for your help.

Best Regards,

Siddharth