Account

Hello Dhruvika,


Accounting treatment differs depending on when the possession (Possession, not ownership) is transferred to the buyer.

If the client is allowed to use the land from the first installment, it is recommended to treat it as Hire-sale and book sales right away :

Hire-purchaser/Debtor A/c Dr.
To Hire-Sale A/c
 

and then on each installment :

Cash/Bank A/c Dr
To Hire Purchaser A/c

But if the plot is handed over after payment of the last installment, then you should treat the installments as advance received, and book sale after the payment of the last installment.

Note : the completion of dastavej has no significance in accounting. It gains its importance only when it comes to taxation.

Hope this was of help.

Ansari Salman

Possession will be given only after dastavej process completed.

will not giving possession after payment of installments.

As per As 9 Sale Booking done once you make dastavej not before that.

@ Santosh :

The amount of sale must be sum of all installments i.e. the total amount receivable from the debtor. Thus, there should be no balance left in his account after paying the last installment.


@ Dhruvika :

I didn't fully understand the last question. Grammar issues.

Either way, AS9 tells us to recognise the sale as and when the transfer of property takes place. There is no mention of any dastavej or documentary evidence of any kind as a necessity to register sale.

Also, Hire-purchase accounting is an established method of accounting to record transactions of the kind you are dealing with. I'll suggest you look it up.

Transfer of property take place only when we did dastavej not befor that so without documentory evidance how we can record sales in our books.??

My question is can we treat installment received as a sale before dastavej take place??

is there any income tax or any other issues arise if we treat installment as sale ??

We are showing all installment received as advance received against plot under current Liablities.