Urgent-----prop. to partnership which one is better
This query is : Resolved
19 September 2011
one of the Trading concern(Cement Trading) Handled two people but till up to time this one is as a proprietary.
both are Govt. Servant and salary is non taxable.
so please guide me ..... is partnership will be better for them with their name or wife's.
And please also suggest....
Purchase 1000 Bags (cement)
Sale(Billing) 600 Bags
Cash sale(non billing) 400 Bags
then tell me accounting for non billing (Cash) Sale.
both are Govt. Servant and salary is non taxable.
so please guide me ..... is partnership will be better for them with their name or wife's.
And please also suggest....
Purchase 1000 Bags (cement)
Sale(Billing) 600 Bags
Cash sale(non billing) 400 Bags
then tell me accounting for non billing (Cash) Sale.
19 September 2011
In case mentioned by you i feel partnership businees on the name of wife will be better.
And in case of accounting entries of cah sale in my opinion no entry should be passed rather purchase should be shown at such lower extent in properiteroy books.
And in case of accounting entries of cah sale in my opinion no entry should be passed rather purchase should be shown at such lower extent in properiteroy books.
19 September 2011
if i cant booked cash sale then whats about stock
19 September 2011
When u lower down your purchase to 600 bags only no matter of stock will arise.
19 September 2011
But how i can book purchase only 600 bags instead of 1000 bags.
02 August 2025
Got it, here’s a breakdown and advice for your situation:
---
### 1. **Proprietorship vs Partnership for Govt. Servants**
* Since both are government servants and their salary income is non-taxable, having a **proprietorship** in their own name might create a conflict or scrutiny.
* **Partnership in the wife’s name** is often suggested to avoid direct involvement that could conflict with government service rules.
* A **partnership firm (with wives as partners)** can also be formed to share capital, responsibility, and income.
* Make sure this arrangement complies with government service conduct rules regarding outside business.
---
### 2. **Accounting for Purchase and Sales**
* Purchase = 1000 bags cement
* Sale (Billing) = 600 bags
* Cash sale (Non-billing) = 400 bags
---
### 3. **Treatment of Non-Billing Cash Sale**
* **Cash sales should be recorded** in the books even if not billed formally because it affects stock and profit.
* Not recording cash sales leads to **stock misstatement** (inventory will be overstated).
---
### 4. **Suggested Accounting Entries**
* **When purchase of 1000 bags happens:**
```
Purchase A/c Dr. 1000 bags @ cost
To Cash/Bank A/c or Creditors A/c
```
* **When sale of 600 bags is billed:**
```
Cash/Bank or Debtors A/c Dr.
To Sales A/c 600 bags @ selling price
```
* **When cash sale of 400 bags happens (non-billing):**
```
Cash A/c Dr.
To Sales A/c 400 bags @ selling price
```
* **Stock adjustment at period end:**
Closing stock = Opening stock + Purchases – Total Sales (billed + cash sales)
---
### 5. **If Cash Sales Are Not Recorded**
* If you don’t record cash sales, you must adjust purchases to only 600 bags, but this causes issues:
* Actual purchases are 1000 bags, so not recording 400 bags purchase is wrong.
* Stock will be incorrect as 400 bags are sold but not accounted for.
---
### 6. **Conclusion**
* **Best practice is to record all sales (billing + cash) properly.**
* Non-billing cash sales are still income and should be shown to maintain accurate records.
* Partnership in wife’s name is suggested to avoid government employee conflict.
* Consult with a Chartered Accountant for compliance with tax and service rules.
---
If you want, I can help prepare sample accounting entries or explain partnership formation details. Just let me know!
---
### 1. **Proprietorship vs Partnership for Govt. Servants**
* Since both are government servants and their salary income is non-taxable, having a **proprietorship** in their own name might create a conflict or scrutiny.
* **Partnership in the wife’s name** is often suggested to avoid direct involvement that could conflict with government service rules.
* A **partnership firm (with wives as partners)** can also be formed to share capital, responsibility, and income.
* Make sure this arrangement complies with government service conduct rules regarding outside business.
---
### 2. **Accounting for Purchase and Sales**
* Purchase = 1000 bags cement
* Sale (Billing) = 600 bags
* Cash sale (Non-billing) = 400 bags
---
### 3. **Treatment of Non-Billing Cash Sale**
* **Cash sales should be recorded** in the books even if not billed formally because it affects stock and profit.
* Not recording cash sales leads to **stock misstatement** (inventory will be overstated).
---
### 4. **Suggested Accounting Entries**
* **When purchase of 1000 bags happens:**
```
Purchase A/c Dr. 1000 bags @ cost
To Cash/Bank A/c or Creditors A/c
```
* **When sale of 600 bags is billed:**
```
Cash/Bank or Debtors A/c Dr.
To Sales A/c 600 bags @ selling price
```
* **When cash sale of 400 bags happens (non-billing):**
```
Cash A/c Dr.
To Sales A/c 400 bags @ selling price
```
* **Stock adjustment at period end:**
Closing stock = Opening stock + Purchases – Total Sales (billed + cash sales)
---
### 5. **If Cash Sales Are Not Recorded**
* If you don’t record cash sales, you must adjust purchases to only 600 bags, but this causes issues:
* Actual purchases are 1000 bags, so not recording 400 bags purchase is wrong.
* Stock will be incorrect as 400 bags are sold but not accounted for.
---
### 6. **Conclusion**
* **Best practice is to record all sales (billing + cash) properly.**
* Non-billing cash sales are still income and should be shown to maintain accurate records.
* Partnership in wife’s name is suggested to avoid government employee conflict.
* Consult with a Chartered Accountant for compliance with tax and service rules.
---
If you want, I can help prepare sample accounting entries or explain partnership formation details. Just let me know!
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