banner_ad

Accounting treatment??

6579 views 8 replies

Dear all,

Please let me know what is the accounting treatment of following transaction.

ABC Co. Purchased a Vehicle (Car) of Rs.30,00,000/-

Loan from Bank is about 20,00,000/-

Balance Rs.10,00,000/-

Margin Money is Rs.100,000/-

R. Tax etc. Rs.250000/-

Total Payment to Dealer=Rs.13,50,000/-

Cash Discount given by dealer=Rs.50,000/-

Net Payment=Rs.13,00,000/-

Replies (8)

Below entry needs to be psoted:

 

 

Vehicle A/C  Dr 3200000       3000000+250000-50000
To- Bank Loan     -2000000        
to- Bank       -1200000   1350000-50000-100000

Mr.Giridhar, can the Road Tax be accounted as prepaid and the value of the car as asset instead of adding the tax to the cost, then yearly reduce the prepaid Road Tax and book as expense, because road tax is a recurring exp.not one time.

Dear Giridhar, if the invoice bill is of car is Rs.30,00,000/- and road Tax Receipt is Rs.250000/-. Then i think Car should be booked of amount Rs.3250000/- Instead of Rs.32,00,000/-. And further there is cash discount of Rs.50000/- should be booked in Discount Received A/c. I think i m right here.

Let me know, If i m wrong please...

Thanks in advance.. 

Mr frank, I dont think that road tax is an recurring expense, unlike insurance. It's a one-time cost and is incurred in connectin with the purchase of the car, hence it should be capitalised alongwith cost of the car.

Mr Sanjay, I have considered the road tax & debited to the cost of the car.  however as the cash discount received is not revenue in nature as it is given in connection with an fixed asset hence it is reduced from the cost of the car and should not be shown as an income.

But dear Giridhar, why should i reduced my car cost, as the invoice bill not shown any discount. This discount has come to know after receiving the invoice bill.

Please correct me if i m wrong...

Thanks..

Mr Sanjay, please refer AS10 Accounting for fixed assets. In that it is given that any trade discount should be deducted from teh cost of the fixed asset, while arriving at teh purchase value.  As per your statement teh discount is not shown in the invoice.  So as it is an trade discount which shud be deducted from teh cost of the fixed asset.  Hope this makes clear.

Thanks Mr. Giridhar..yes

Dear All,

 

AS-10 says when an asset is purchased all the amount incured to bring the asset in wroking condition or put to use should b capitalised.

So the road tax paid shold be capitalised not prepaid expenses.

Incase let us assume u want to account it as prepaid expenses can you tell me for how many years will you account it for??


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
Featured 02 May 2026
Senior Executive

hitesh chandwani & co

Pune

B.Com

View Details
Company
Featured 29 April 2026
Manager- Finance and Compliance

Naveen Fintech Pvt Ltd

Kolkata

CA Inter

View Details
Company
Featured 14 April 2026
GST CONSULTANT

Abhishek G Agrawal & Co.

Korba

CA Final

View Details
Company
Featured 13 April 2026
GST CONSULTANCY

Abhishek G Agrawal & Co.

Korba

CA Final

View Details
Company
Featured 28 March 2026
Accountant

Ashok Amol & Associates

New Delhi

B.Com

View Details
Company
Featured 28 March 2026
CA Final

Ashok Amol & Associates

New Delhi

CA Final

View Details
Company
Featured ARTICLESHIP 19 March 2026
Article Assistant

Gupta Sachdeva & Co. Chartered Accountants

New Delhi

CA Final

View Details
Company
Featured 14 March 2026
Associate CA

N N V Satish&co

Hyderabad

CA

View Details