Profit and Loss A/c for FnO trader

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Lila

Job

463 Points Posted on 24 September 2020

Assuming, we have profit from FnO trades of Rs. 40000 (Sale - 10,00,000 and purchase 9,60,000) and loss of Rs, 55,000 (Sale 7,45,000 and purchase 8.00.000). Now what amount should be shown as Turnover in P/L account, ITR and Form 3CD:

1) Rs. 17,45,000 (10,00,000 + 745,000) and corresponding purchase of Rs. 17,60,000

2) Rs. 40,000 and corresponding loss of Rs. 55,000

3) Rs. 95,000 (as per ICAI guidance) - In this case, what should be shown as expenses to reach at final loss amount of Rs. 15.000?

Clarification to this would be highly appreciated..

Replies (7)

Quick Summary

This discussion clarifies how Futures & Options (FnO) traders should present their profit and loss accounts, particularly regarding turnover for tax purposes. It explores different methods of showing gains and losses, whether as sales/purchases or separate income/expense items. The conversation also touches upon the implications for Income Tax Return (ITR) and Form 3CD reporting, with references to accounting standards like AS 9 and IndAS.

yasaswi gomes

My grammar is 💯 good I

5110 Points Posted on 25 September 2020

One can present them as losses and gains separately in income statement.

Then, you can set off gains from losses and carry forward losses to file ITR.

I’m not sure about Form 3CD

Lila

Job

463 Points Posted on 29 September 2020

Thanks for your reply.

Should the gains be shown as sales of services or as Other income. Losses should we show as purchases or other direct income?

Also if someone could reply on 3CD turnover. Further what notes to accounts should come in the audited financials of FnO trader as per ICDS.

yasaswi gomes

My grammar is 💯 good I

5110 Points Posted on 29 September 2020

That depends upon the nature of business. Go through principal agent relationship in revenue recognition standard. If you fall under that, commission accounting is required. His is for IndAS accounting. https://www.mca.gov.in/Ministry/pdf/Ind_AS18.pdf. Here losses and gains are separately identified and presented from Revenue.

If your following AS9, you cannot recognise the gain as revenue

and principal agent relationship exists in this standard. https://www.mca.gov.in/Ministry/notification/pdf/AS_9.pdf

yasaswi gomes

My grammar is 💯 good I

5110 Points Posted on 29 September 2020

Now there is another way to find out about the treatment of loss, check b.com, MBA textbooks like I did just now and you’ll be surprised that there is no treatment for losses on instruments in trading & P&L account apart from bad debts written off. However, AS 9 treats revenue separately and losses separately in the income statement and debits all losses and credits all gains. I’m sorry, I meant agency relationship exists in as9 as well.

yasaswi gomes

My grammar is 💯 good I

5110 Points Posted on 29 September 2020

This should make everyone realise that IndAS is sophisticated than AS and should be made redundant in India. Because CA has to study both of them and one is (AS) waste of time.

Lila

Job

463 Points Posted on 29 September 2020

My query is:

Should the gains be shown as sales of services or as Other income.

Losses should we show as purchases or other direct income? Also if someone could reply on 3CD turnover. Further what notes to accounts should come in the audited financials of FnO trader as per ICDS.