Accounting treatment
This query is : Resolved
16 March 2012
I got a problem during the course of audit in our client place.
and we can not make the decision about the account procedure on such case.
the case is as follows
*My Client had purchased land for Rs. 1 Crore in April 2005.
*In the year 2011 my client entered in an agreement with a party(say ABC ltd) to sell such land for Rs 10 Crore, to be sold on 30.11.2012.
*They entered an agreement to be performed with in 6 months and received an advance of Rs. 2 crore on 01.06.2011
*on 1.12.2011 ABC Ltd fails to perform the contract, they refused to purchase the land and as per the terms of the agreement our client forfeited the money of Rs 2 cr.
* Now the problem is how can we present such 2 cr. In Financial Statements of 2011-12?
and we can not make the decision about the account procedure on such case.
the case is as follows
*My Client had purchased land for Rs. 1 Crore in April 2005.
*In the year 2011 my client entered in an agreement with a party(say ABC ltd) to sell such land for Rs 10 Crore, to be sold on 30.11.2012.
*They entered an agreement to be performed with in 6 months and received an advance of Rs. 2 crore on 01.06.2011
*on 1.12.2011 ABC Ltd fails to perform the contract, they refused to purchase the land and as per the terms of the agreement our client forfeited the money of Rs 2 cr.
* Now the problem is how can we present such 2 cr. In Financial Statements of 2011-12?
16 March 2012
I think it is compansation received and it would be taxable under the head other income the entry would be on the date of agreement.
Bank a/c dr Rs.2 crores
To Advance for sale of land Rs.2 crores
On the date of refuse of contract and forfeited of amount
Advance for sale of land Dr Rs.2 crores
To Compansation received Rs.2 crores
(Being due to the refuse of contract the advance money forfeited)
and
Compansation received Dr Rs.2 crors
To P&L a/c Rs. 2 crores
(Being compansation received transfered to P&L)
OM SAI SRI SAI JAI JAI SAI
Bank a/c dr Rs.2 crores
To Advance for sale of land Rs.2 crores
On the date of refuse of contract and forfeited of amount
Advance for sale of land Dr Rs.2 crores
To Compansation received Rs.2 crores
(Being due to the refuse of contract the advance money forfeited)
and
Compansation received Dr Rs.2 crors
To P&L a/c Rs. 2 crores
(Being compansation received transfered to P&L)
OM SAI SRI SAI JAI JAI SAI
16 March 2012
this is the suggestion i have given, but some of the frns/ seniors says this is not the correct entry though i hav not received any different suggestions.....
are there more alternatives to this case
are there more alternatives to this case
16 March 2012
There is no other alternative if you not satisfied with it just deduct it from the cost of purchase of the land or also consider it in the sale vale at the time of actual sale made. But i don't like it because this is not correct way any way wait for some other experts and seniors decision.
OM SAI SRI SAI JAI JAI SAI
OM SAI SRI SAI JAI JAI SAI
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