HUNAID (Service) (86 Points)
13 February 2014PETTY CASH QUERY: while doing audit of petty cash i found that sometimes droping guest from hotel to airport a tour car has been hired and that expense is shown sometimes as MOTOR VEHICLE EXPENSE and sometimes as HIRE CHARGES is the entry done in both the ledger is proper. PLEASE REPLY ASAP.
SUMIT KUMAR JANGID
(CA FINAL STUDENT)
(136 Points)
Replied 13 February 2014
If the guest droped in the personal car or relatives car then the Charges will be shown as MOTOR VEHICLE EXPENSE and If in the hired car then will be shown as HIRE EXPENSES.
Second point i.e; it also depand upon the situation. So also discus with staft or persons as can possibe.
HUNAID
(Service)
(86 Points)
Replied 13 February 2014
First of all THANKS for your reply. i just want to know what is the difference between both the ledger(i.e MOTOR VEHICLE EXPENSES & HIRE CHARGES) does it make any difference if entry has been done in either of them, because at the end it is shown as an expense only.
Milind M. Kulkarni
(Practicing CA)
(580 Points)
Replied 13 February 2014
Using either of the 2 account heads does not make much differnece since both are indirect expenses, but using both the accounts alternatively for the same nature of transaction is an incorrect practice. They should use any one account consistently. conceptually, as Sumit has clarified, Motor Car Exp A/c should be used when own car is used and Car Hire Charges (not just Hire charges) used when a hired car is used. But use of any one of the 2 accounts can be accepted if consistency is maintained.
The hotel can also take a view that hired cars are direct expenses since they are directly used for providing service to customers and can treat accordingly. This classification should be determined thoughtfully and followed consistently since that affects gross profit. Here, argument that both are debited to P & L will not be valid.
CAclubindia
