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Drawings / bank charges

TRILOCHAN (SENIOR ACCOUNTANT) (698 Points)

22 March 2012

Dear All,

My question is if tha bank debited Rs.57000/- as bank charges for making Pay order for Purchase of Residential property of the Proprietor:

Pls advise me whether it is treated as Drawings or Bank Charges.

Regards :

TRILOCHAN OJHA

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12 Replies

Sonam Bidasaria (CA) (770 Points)
Replied 22 March 2012

It will be bank charges.

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 22 March 2012

HI,

These are Bank Charges.

TRILOCHAN (SENIOR ACCOUNTANT) (698 Points)
Replied 22 March 2012

Hi,

Pay order was made from Savings Account........

Rakesh Rao (CA Final Student) (408 Points)
Replied 22 March 2012

Hi Sonam, Prateek

Is it wrong if the Bank Charges is added to the cost of the Residential Property of the proprietor?? This will make a difference at the time of sale because it will be increased due to indexation.

If it is not added to the cost of Property, then I feel it should be debited to Drawings, as it is purely personal expense incurred on Personal Property. But I still feel the former option is correct. Please correct me if I am wrong.

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 22 March 2012

It is irrelevant whether PO was made from Savings or Current A/c.

Still, it is bank charges

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 22 March 2012

Hi Rakesh,

Bank Charges cannot be added to the cost of the property as only those charges which are incurred for procuring the asset shall be added to the purchase cost.

Stamp Duties, Registration charges can be included but not bank charges. Just because its a significant amount, doesn't mean that it should be a Drawings deducted from the Capital of the individual. Bank Charges are also allowed as deduction from income of the individual.

Regards,

Prateek

CA Ghanshyam Joshi (CA, Dip IFR (ACCA UK)) (3229 Points)
Replied 22 March 2012

Originally posted by : TRILOCHAN
	Dear All, My question is if tha bank debited Rs.57000/- as bank charges for making Pay order for Purchase of Residential property of the Proprietor: Pls advise me whether it is treated as Drawings or Bank Charges. Regards : TRILOCHAN OJHA

The purpose of the pay order is for purchasing the residential property of the proprietor.

This is his personal property and not a business asset. hence the charges debited by Bank should be taken to the drawings/withdrawals of the proprietor. It is not allowable as business expenses.

Sunil Singh (Accountant) (21 Points)
Replied 22 March 2012

Hi Frnds,

Plz let me knw abt TDS rates 2012-13..

In Corporates, Trading & Normal products.

Regards

Sunil

Devendra (Chartered Accountant) (4775 Points)
Replied 23 March 2012

As per my knowledge, expense towards purchase of Residential Property is a personal expense which is to be debited to Drawings A/c.

Regards,

Devendra Kulkarni

Kalpesh Chauhan, (Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com)) (8310 Points)
Replied 24 March 2012

Agree with Mr. Devendra & CA Ghanshyam

Harkesh Kumar (Finance Manager) (97 Points)
Replied 24 March 2012

Ofcourse !

It will be treated as Bank charges

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 24 March 2012

Whenever a DD / PO is created, it is made for a purpose, be it personal or commercial.

I had made several DD's during my CA and CS Course. They are my personal expenses and DD Charges were charged by bank.

As per your views, i should be adding those charges to my education expenses as the PURPOSE of making DD / PO is my education. Similarly, there are numerous cases wherein you have to make DD / PO but you don't add the Bank Charges to your PURPOSE for which they were made.

Just because the amount is significant doesn't mean they should be added to the cost of residential property.

I still think...Rs. 57,000/- are bank charges.

Prateek