Passing of accounting entry

This query is : Resolved

Srinivas Rao (Querist)
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22 October 2024 A four wheeler vehicle is registered in the name of Pvt. Ltd. Company 'X' and depreciation is claimed every year.

Due to some reasons the above vehicle underwent for repairs and maintenance and the invoice amount was Rs. 2.73 lacs and this invoice amount was paid through Bank transaction by another Pvt. Ltd. Company 'Y' due to shortage of funds in Pvt. Ltd. Company 'X' .

One of the Directors in both the Companies is the same person.

How to pass the entries in books of account for the above payment of Rs. 2.73 lacs in both the Companies .

Any implication as per Income Tax Act and in reporting.
Plz clarify.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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22 October 2024 Company X (Vehicle Owner)
Debit: Vehicle Repair & Maintenance Expenses (Expense Account) - Rs. 2.73 lacs
Credit: Debtors/Payable to Company Y (Current Liability) - Rs. 2.73 lacs
Company Y (Paying Company)
Debit: Sundries/Payable by Company X (Current Asset) - Rs. 2.73 lacs
Credit: Bank Account (Asset Account) - Rs. 2.73 lacs

Srinivas Rao

Srinivas Rao (Querist)
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22 October 2024 Does this transaction come under Related Party Transaction ?

Srinivas Rao

Srinivas Rao (Querist)
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22 October 2024 What if the entry is passed in the books of 'Y' as follows :
Vehicle Repairs & Maintenance Exps ...Dr
To Bank Account

Srinivas Rao

Srinivas Rao (Querist)
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22 October 2024 What if the entry is passed in the books of 'Y' as follows :
Vehicle Repairs & Maintenance Exps ...Dr
To Bank Account

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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22 October 2024 As the vehicle is not owned or hired by 'Y', that would be wrong entry.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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22 October 2024 As such there are no transactions between these companies to be termed as related party transactions. A Related Party Transaction (RPT) refers to a transfer of resources, services, or obligations between entities that are connected through a relationship of control, ownership, or management.

Srinivas Rao

Srinivas Rao (Querist)
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22 October 2024 Thank you very much Sir for your excellent clarification.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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22 October 2024 You are welcome.

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