Cash payments above 20000/-

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2013 OURS IS A PARTNERSHIP FIRM WHICH WAS NEWLY STARTED IN OCTOBER 2012.
IN NOVEMBER 2012 WE PURCHASED FURNITURE FOR OUR OFFICE IN THE NAME OF THE FIRM AMOUNTING TO Rs. 180000/-.
THE ENTIRE AMOUNT OF Rs. 180000/- WAS PAID IN CASH ON A SINGLE DAY.ACCORDINGLY THE SUPPLIER ALSO RAISED A SINGLE BILL FOR Rs. 180000/-.
THIS WAD DONE BY THE PARTNERS WITHOUT LACK OF KNOWLEDGE OF INCOME TAX PROVISIONS.

AS AN ACCOUNTANT NOW I FIND IT DIFFICULT TO RECORD THE ABOVE TRANSACTION IN BOOKS OF ACCOUNT AS I THINK THE ENTIRE AMOUNT MAY BE DISALLOWED AS PER SECTION 40 A
(3).

MY QUERY IS :
1. HOW TO AVOID DISALLOWANCE IF APPLICABLE?

2. FURNITURE BEING AN ASSET,IS SECTION 40 A (3) APPLICABLE OR NOT?

3. CAN I PASS JOURNAL ENTRY IN THE BOOKS OF ACCOUNT FOR Rs. 180000/- AS FOLLOWS:

ASSET A/C ..... DEBITED
TO SUPPLIER A/C
(Being Liability for furniture purchased)

WHEN PAYMENT IS MADE SUPPLIERS A/C WILL BE DEBITED FOR Rs. 180000/-.
IF I FOLLOW THE ABOVE PROCEDURE WILL SEC 40 A(3) BE STILL ATTRACTED?

4. ANOTHER ALTERNATIVE IF I TREAT THE ENTIRE PAYMENT OF Rs. 180000/- AS ADVANCE and LATER ON I PASS JOURNAL VOUCHER BY DEBITING TO ASSET A/C AND CREDITING TO ADVANCE A/C.
IS THIS ALTERNATIVE CORRECT?

5. OR STRAIGHT AWAY CAN I RAISE VOUCHER FOR Rs. 180000/- enclosing the bill of Rs. 180000/-.

6. OR SHOULD I COLLECT BILLS BELOW 20000/- ON DIFFERENT DATES FOR THE ENTIRE AMOUNT OF 180000/- i.e., splitting the amount.

KINDLY ADVISE ME THE CORRECT PROCEDURE AND SUGGEST ME THE CORRECT WAY OF ACCOUNTING THE ABOVE EXPENDITURE WITH THE HELP OF ENTRY SO AS TO AVOID DISALLOWANCE OF EXPENDITURE IF SECTION 40 A(3) APPLIES.

SIMILARLY WE HAVE PURCHASED 04 AIR CONDITIONERS FOR OUR OFFICE FOR Rs. 120000/- and the entire amount was PAID IN CASH in a single day AND A SINGLE BILL FOR Rs. 120000/- WAS RASIED by the supplier.
THIS WAS ALSO DONE BY THE PARTNERS.

KINDLY SUGGE3ST ME .

Amol S Joglekar

Amol S Joglekar (Expert)
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09 January 2013 Let the furniture be brought in the FIRM by the partners as CAPITAL.

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2013 BUT THE BILL WAS RAISED IN THE NAME OF THE FIRM

Amol S Joglekar

Amol S Joglekar (Expert)
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09 January 2013 Then leave it to the imagination of Assessing Officer. You pass the entries as usual without taking any botheration of sec 40

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