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Account

dhruvika (Account Executive) (32 Points)

12 June 2015

Dear All,

We are engagged into one of real estate plotting system in dholera.

We are selling plots in full payment as well in installment.

Installment of client received was booked in our book as advance aginst plot.

We didnt consider the same as sale? or after only completion of dastavej we treat sale??

What is correct condly suggest,

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6 Replies

CA Salman Ansari (Salman Ansari & Assoc.) (247 Points)
Replied 12 June 2015

Hello Dhruvika,

Accounting treatment differs depending on when the possession (Possession, not ownership) is transferred to the buyer.

If the client is allowed to use the land from the first installment, it is recommended to treat it as Hire-sale and book sales right away :

Hire-purchaser/Debtor A/c Dr.
To Hire-Sale A/c

and then on each installment :

Cash/Bank A/c Dr
To Hire Purchaser A/c

But if the plot is handed over after payment of the last installment, then you should treat the installments as advance received, and book sale after the payment of the last installment.

Note : the completion of dastavej has no significance in accounting. It gains its importance only when it comes to taxation.

Hope this was of help.

Ansari Salman

1 Like

Prabhakar Verma (B.Com) (23 Points)
Replied 12 June 2015

I'm agree with Mr. Ansari accounting only counts which comes related to money fulfilling of dastavej is not a part or accounting....

santosh (article assitant) (54 Points)
Replied 12 June 2015

What amount will be recorded at the time of sale if possession is given at first installment?

dhruvika (Account Executive) (32 Points)
Replied 12 June 2015

Possession will be given only after dastavej process completed.

will not giving possession after payment of installments.

As per As 9 Sale Booking done once you make dastavej not before that.

CA Salman Ansari (Salman Ansari & Assoc.) (247 Points)
Replied 12 June 2015

@ Santosh :

The amount of sale must be sum of all installments i.e. the total amount receivable from the debtor. Thus, there should be no balance left in his account after paying the last installment.

@ Dhruvika :

I didn't fully understand the last question. Grammar issues.

Either way, AS9 tells us to recognise the sale as and when the transfer of property takes place. There is no mention of any dastavej or documentary evidence of any kind as a necessity to register sale.

Also, Hire-purchase accounting is an established method of accounting to record transactions of the kind you are dealing with. I'll suggest you look it up.