Regarding cc a/c

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This query is : Resolved

Waquar Ahmad (Querist)

05 February 2012 Dear Sir/Madam,
If I am having a CC A/c of Rs.200000.00 limit for the registered shop. Shall I invest the Rs.800000-Rs.100000 in purchasing of land or flat from that very a/c & how can it will be shown in the book.
Will be thankful for ur valuable suggestions.

Thanks & Regards
Waquar Ahmad Afaque

CS, Deepak Pratap Singh

CS, Deepak Pratap Singh (Expert)

06 February 2012 Dear fried first it shows that your business is a proprietorship business. In this case all deductions from above account will be shown as Drawings or Loan & Advances received from business.

G.Ramesh

G.Ramesh (Expert)

06 February 2012 Agreed with the expert

Waquar Ahmad

Waquar Ahmad (Querist)

06 February 2012 Thanks for the answer sir & business is in proprietorship but if I take the amount as loan & adv. from business then I have to pay the amount after certain period of time.Is there any other way to show the amount from bank & purchase flat or land from that very amount.
Will be thankful for the reply.

Thanks & Regards
Waquar Ahmad Afaque

Waquar Ahmad

Waquar Ahmad (Querist)

06 February 2012 Thanks for the ans sir. The business is proprietorship business and if I withdrawal then I have to show as loan & adv from business. Is there any other way to show the money as I am going to buy the flat or land from that amount.

Will be waiting for the reply.

Thanks & Regards

Waquar Ahmad Afaque

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)

20 July 2025 Thanks for your question regarding using the funds and accounting treatment for your Cash Credit (CC) account in a proprietorship business.

Scenario:
CC Account limit: ₹2L (working capital loan against stock/debtor etc.)
You want to invest ₹8L - ₹1L = ₹7L (excess funds) in purchasing land/flat from this CC account.
Important Points:
Purpose of CC Account
A Cash Credit account is meant for working capital requirements — typically day-to-day business expenses or short-term credit needs.
Using CC funds for purchase of fixed assets like land or flat is generally not advisable or allowed as per bank terms, unless specified.
Accounting Treatment in Proprietorship
In a proprietorship, the owner and business are not separate legal entities.
If you withdraw money from business (even CC funds) for personal investments like land/flat, it is treated as withdrawal by proprietor.
This is recorded as ‘Drawings’ (not as loan to proprietor or advance).
Drawings reduce owner’s equity in business.
Alternative Treatment
If you want to show this as loan/advance from business, it should ideally be a formal loan agreement with terms, interest, etc.
But in proprietorship, such formalities are rare and may complicate tax accounting.
Book Entry Suggestions:
When money is withdrawn for land/flat, debit ‘Drawings Account’ and credit ‘Bank/CC Account’.
Land/Flat purchase is a personal asset, so it should not be recorded as business fixed asset unless it is used for business.
If used for business, then record asset purchase in books accordingly.
Summary Table:
Action Accounting Entry (Business Books)
Withdrawal of money for land/flat (personal use) Dr. Drawings A/c / Proprietor’s Capital A/c
Cr. Bank / CC A/c
Purchase of asset for business Dr. Fixed Assets (Land/Building)
Cr. Bank / CC A/c
Important Notes:
Check with your bank if using CC funds for land/flat purchase is permitted. Banks usually restrict CC funds to business working capital only.
For large investments in property, it’s better to use personal funds or term loans specifically for that purpose.

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