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Accounting Treatment

satish r (student) (91 Points)

04 April 2011

A enterprise receives a land as a gift .

What is the accounting treatment in the books of a Business enterprise.??? And what is amount/value shown under the books. of enterprise ???

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15 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 04 April 2011

DEAR SATISH,

THE LAND SHOULD BE SHOWN AT THE MARKET VALUE TO STATE THE CORRECT POSITION OF THE BALANCE SHEET.

FOLLOWING IS THE JV TO BE PASSED TO GIVE THE EFFECT IN THE BALANCE SHEET :-

LAND A/C DR. 1000000

TO GIFT A/C 1000000

(BEING LAND RECEIVED AS GIFT)

REGARDS,

DEVENDRA KULKARNI

1 Like

Shriram Ramachandran (IPCC Student CWA Inter & Processing officer in GNSA Infotech Ltd) (492 Points)
Replied 05 April 2011

K Gift A/c has to be Grouped Under which Group?

Thanks

R Shriram

Devendra (Chartered Accountant) (4775 Points)
Replied 06 April 2011

GIFT IS TO BE GROUPED UNDER INDIRECT INCOMES.

REGARDS,

DEVENDRA

1 Like

Shriram Ramachandran (IPCC Student CWA Inter & Processing officer in GNSA Infotech Ltd) (492 Points)
Replied 06 April 2011

Thanks Devendra.......

R Shriram

satish r (student) (91 Points)
Replied 10 April 2011

Dear Devandra,

I dont think it is shown be under Gift account and showing the market value as it GIFT (without consideration) and more over it is not at all a income for the enterprise. if land is debited, land is brought in, & hw where is d corresponding liability created.......?????!!!

Raj (Assistant) (56 Points)
Replied 23 April 2011

What about an enterprise receives sales items or cash as gift ?

What is the accounting treatment ?

Raj (Assistant) (56 Points)
Replied 23 April 2011

There is a forum already in this regard: -

/forum/accounting-treatment-of-gift-34974.asp

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 24 April 2011

Originally posted by : satish r
	A enterprise receives a land as a gift . What is the accounting treatment in the books of a Business enterprise.??? And what is amount/value shown under the books. of enterprise ???

even as gift the land has to get transferred by registration instrument, and the price adopted by registrar as fair value would be considered as gift value.

an enterprise is not a person, so the gift would be passed through P/L account

however u can capirtalize it direct but u have to take back it again at computation sheet for addition of gift tax.

Sumit (Student) (45 Points)
Replied 29 April 2011

1.) Land A/c Dr

To Donor A/c

[with the amount of fair value as decided by registrar+registry charges(if paid by donor)]

2.) Land A/c Dr

To Registry charges A/c

(if registry charges paid by donee)

3.) Registry charges A/c Dr

To bank/cash A/c

(if Registry Charges paid by donee)

4.) Donor A/c Dr

To Gift A/c

Note:-

Donor A/c is created under the head Sundry Creditors.

Gift A/c is created under the head Indirect income.

Pankaj Arora (Learner) (3134 Points)
Replied 30 April 2011

But sumit how will be write off donor a/c from creditors because it will stand there in creditors..

Prakash Popat (3134 Points)
Replied 30 April 2011

Land accounts naturally debited as Assets Comes in & Credit to Capital account/Reserve & Surplus accounts directly.

Prakash Popat (3134 Points)
Replied 30 April 2011

Land accounts naturally debited as Assets Comes in & Credit to Capital account/Reserve & Surplus accounts directly.

Sumit (Student) (45 Points)
Replied 30 April 2011

Check again my entries..Donor a/c will not stand..

Sumit (Student) (45 Points)
Replied 30 April 2011

How can u directly credit Reserves & surplus A/c??

That Gift value is indirect income of that year & will be taxed..And must come in P & L A/c and thereafter Net profit of that year will be transferred to Reserves & surplus A/c..