Gift by pvt ltd company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 November 2011 PVT COMPANY HAVING 2 DIRECTORS.ONE DIRECTOR GAVE JEWELRY WORTH 1 LAC TO HIS RELATIVE FROM THE ACCOUNT OF COMPANY.PLS SUGGEST ACCOUNTING EFFECT.

Querist : Anonymous

Querist : Anonymous (Querist)

05 December 2011 hey plz experts replyyyyyyyy....

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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25 July 2024 When a director of a private limited company gives jewelry worth 1 lakh to his relative from the company's account, the accounting treatment is as follows:

1. **Debit the Director's Account**: The amount of 1 lakh should be debited to the account of the director who gave the jewelry. This transaction represents an advance or loan given by the company to the director.

**Accounting Entry**:
```
Director's Loan Account Dr. 1,00,000
To Bank/Cash Account 1,00,000
```

Here, "Director's Loan Account" is debited with 1,00,000 representing the amount given to the director.

2. **Credit the Bank/Cash Account**: The corresponding entry is to credit the bank or cash account from which the payment was made.

**Accounting Entry**:
```
Bank/Cash Account Dr. 1,00,000
To Director's Loan Account 1,00,000
```

This entry reflects the reduction in the company's bank balance or cash holdings by 1,00,000.

3. **Repayment or Adjustment**: If the jewelry is given as a loan or advance, the director should repay this amount to the company in due course. The repayment will involve reversing these entries when the director repays the company.

4. **Compliance and Reporting**: It's crucial to document this transaction properly. The company should maintain records such as a resolution authorizing the transaction, details of the jewelry given, and ensure compliance with company law and income tax regulations regarding loans to directors.

5. **Tax Implications**: Such transactions should also consider the tax implications both for the company and the director, as per the provisions of the Income Tax Act, 1961.

It's advisable to consult with a chartered accountant or tax advisor to ensure compliance with all applicable laws and to correctly account for such transactions in the books of the company.

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