Proprietor expenditure entry under gst

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Deepa (Querist)
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09 March 2018 Good Evening Sir,
I have a doubt in proprietor Expense Account, can u pls tell me.. Question is Proprietor made payment of premium through cheque favouring to Health Insurance Co. Ltd.So what will be the entry. It has GST tax @18% also.

Ashish Bansal

Ashish Bansal (Expert)
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11 March 2018 Health Insurance premium is a personal expenditure and thus should not be treated as business expenditure, therefore it will be treated as drawings.
GST in health insurance premium is under block list so no ITC can be claimed on such premium.

Deepa

Deepa (Querist)
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12 March 2018 Thank U Ashish Ji,
Ok No ITC taken and posted under capital account.
Can u tell me all his (Propreitor)personal expenditure cheque issued is under expenses or capital account.
1) When i take his personal expenditure under capital account,Profit is more.
And 2) When i take his personal expenditure under indirect expenses difference in p&L Account.
So, which one is the correct one.my exact question is all propreitor personal expenses goes under capital account or indirect expenses.
Opening capital account is Zero & Newly opened propreitorship Firm.Which posting is correct for balance sheet.
1) By Prop. Capital Acc Dr. Rs.xxxxxxx
To Bank Acc Cr. Rs.xxxxxxx (or)

2) 1) By Prop.Indirect Expenses Acc. Dr. Rs.xxxxxxx
To Bank Acc Cr. Rs.xxxxxxx

Ashish Bansal

Ashish Bansal (Expert)
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01 May 2018 The personal expenditures are not related to business and therefore as per Indian GAAPs, income tax act, GST ACT, these should not be charged to business profits.

Therefore first entry (routing through capital account) is correct one. Obviously if personal expenditures are not charged to profit, actual business profit would be on higher side.

However, sometimes, proprietor pays certain business related expenses from his pocket, in that case, those expenses should be charged to profit and credit should be given to proprietor.

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