Treatment of chit finance in financial statements

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RAJANEESH V R (Querist)
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15 July 2017 Sir,
one of my relative have account with KSFE(Chit)..I would like to know the treatment of his chit fund in the preparation of financial statements....is it shown on p&l or Balance sheet....please guide me

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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15 July 2017 Investment in chits has to be shown in the Balance Sheet.

RAJANEESH V R

RAJANEESH V R (Querist)
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15 July 2017 k sir, what about interest

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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02 August 2025 Hey! For chit funds like KSFE:

* **Investment in chit fund**: shown as an **asset** in the Balance Sheet under **Investments** or **Other Financial Assets**.

* **Interest or Dividend** received (if any) during the period: shown as **Income** in the Profit & Loss account under **Other Income** (often as "Interest Income" or "Dividend Income").

* If your relative **wins the chit** and receives a lump sum, that amount (net of contributions) can be treated as **income**.

* If there are **subscriptions/contributions** made towards the chit fund, those are considered as investment amounts, not expenses.

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So:

| Item | Accounting Treatment |
| ---------------------------- | -------------------------------- |
| Amount invested | Balance Sheet (Investment asset) |
| Interest earned | P\&L (Other Income) |
| Lump sum received on winning | P\&L (Income) |

If the chit is treated like a **financial instrument or investment**, this is the usual way.

Let me know if you want me to help with sample journal entries!

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