Accounting treatment of expenses - reg

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This discussion concerns a partnership firm dealing in real estate that has paid stamp duty in cash from outside its accounting records for both plot purchases and sales. The user is seeking advice on how to properly account for these expenses, specifically whether to debit the Profit & Loss account and credit the Partners' Capital accounts. Further clarification is sought on whether the credit to Partner's Capital should be based on profit-sharing ratios or the actual source of the cash payment, considering potential IT department scrutiny.

SRINIVASA RAO P

SRINIVASA RAO P (Querist)
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03 June 2020 It's a partnership firm engaged in the business of Real Estate.

Involved in purchase and selling of plots.

In the process Firm has paid stamp duty to the Govt. through Challan by way of cash from outside the books of account for execution of sale deeds in favour of the Firm.

Similarly for execution of sale deeds in favour of customers by the Firm.

In other words the entire stamp duty was paid by way of cash from outside the books.

Now my query is how do I account for these expenses in the Books of A/c.

Can I debit the expenses in P& L and credit the amount to Partners Capital A/c.

Plz advise me.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 June 2020 In respect of purchase of plots debit plot purchase account and credit partner's capital account.
In respect of sale of plots cash might have been paid by the.buyer so no need for any accounting on it.

SRINIVASA RAO P

SRINIVASA RAO P (Querist)
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04 June 2020 Sir,
Thank you .
But in case of sale of plots , the buyers have paid the stamp duty amount to the Firm through Bank and was accounted under Advances from Customers(Liability).
But the Firm has paid the stamp duty to the Govt. by way of cash from outside the Books.
So how to account for in the Books and pass the entry.
Plz advise.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 June 2020 In this case debit advance and credit partner's capital.

SRINIVASA RAO P

SRINIVASA RAO P (Querist)
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04 June 2020 Sir,
Should the Partners Capital A/c be credited to the partners account according to their profit sharing ratio bcoz there are two partners.
Plz advise.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 June 2020 Credit based on who paid the money and person having source of income. IT dept may question source of income and cash payment.

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