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Treatment of loss of future and option

meena yadav (79 Points)

28 October 2021  
Hi,

how we treat in company book the loss of future and option in p& l and computation .

please provide treatment in company book and in tax

 3 Replies

Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294)   (2919 Points)
Replied 28 October 2021

Please for this link for your answers to your querry.

https://www.tnkpsc.com/Image/Accountingderivatives.pdf

1 Like

yasaswi gomes (My grammar is 💯 good I)   (6658 Points)
Replied 28 October 2021

I read the American derivative futures in cfa, it’s easy, since your u don’t pay any money while entering into contract, no need to record anything. But for margins, I invented this technique, capitalise margins

Margin balance Asset a/c 1000

To bank a/c 1000

and during the long position, don’t do anything about losses and gains related to basis risk and similarly margin  additional balance or loss. When you settle the contract, if you gain 1500, delivery of cash, then 

Bank 1500

To Margin balance asset a/c 1000

To gain 500

how does this sound? 

 

 

 

yasaswi gomes (My grammar is 💯 good I)   (6658 Points)
Replied 28 October 2021

By the way, its a narrative principle your asking. there are positions with hedge and without hedging, And there are different hedging techniques which are available in your books. As per the tax part, 

A. Delivery based- it falls under Capital gains or PGBP

B. Inraday based- it falls under PGBP

C. Trading- Presumptive scheme of taxation and income tax slab rates applicable to income from business.


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