Saturday, March 2, 2013

Accrual and Prepaid in ERP

I have been asked some journal entries in some interviews. Fortunately I could convince them with my answers. As the interview was progressing, the learned interviewers were trying to know what was that really I did in my past companies. I was assessed from all fronts of my education, starting from theoretical understanding of my concept knowledge on subject matter to the practical applications to the same.

As I was educated on fundamental accountancy on accrual and prepaid,  I could recognise that books of accounts of an entity has to be maintained mandatorily on mercantile basis of accounting. well, now question was how do I record them?

The first question was what is accrual?
The next one followed was how to pass an entry. I explained that we debit an expenses and credit a liability.

But that was not the solution to them. They wanted what is really the entry I will be passing on erp platform.

So friends here is how the picture. There is used to be a notional account through which we are going to transact. Let say, There is revenue accruals. So they have to pass entry like following

Accrued Revenue ( Current Assets)   DR
 To Revenue                                      Cr

Account Receivable ( Current Assets) Dr
To Accrued Revenue                         Cr

Let say we are going to accrue our payables or expenses:

Exp                                                  Dr
To AP accrual Account (C.L)          CR

AP Accrual Account                        Dr
To Liability                                       Cr

Now you can ask me why there is a routing in the notional accounts. At the end it has to be zero right!!!!

You are absolutely right.... Here we go to explain

You know companies go to enterprise resource planning(ERP). This planning is due to certain factors like, Now business has become a global phenomenon and It has resources at different places in globe. It has different currencies, different tax territories, difference organisation set ups. It can have different places for storage and inspectiona and manufacturind.

The varies of processes are 
1.Ordering process, Procuring process and Payment process

2.Issue Process, manufacturing process, inventory valuation process

3.sales process, receivable and customer management process
4. accounting process
5.Manpower recruitment and maintenance process.

All the above processes are varies and situates at varied places. ERP gives a solution for all these at once.

That is why erp recognises each process as accountable process and throughs errors in subsequent process.
In other words, erp dictates error at individual process rather than to carry it forward. It becomes more easy to audit and fix responsibilites.

Thursday, December 6, 2012

Income from House Property
Hi all,
this time I am going to let you know how to plan your income from house property.
As you know that any rental income earned on House property is charged under "Income from House Property", it is important to know how you can get to know your tax liability under the same heading.
I am going to plot this into three Phases.
Phase 1: Recognise your Income
Phase 2: Recognise your Deductions
Phase 3: Calculate tax
Phase 1: Recognise your Rental Income
Here annual Income does not mean the actual rent you receive. This has to be decided with reference to Municipal value or rent receivable subject to standard rent fixed if any. cause neither case rent can exceed standard rent.
Gross annual value is higher of rent received or receivable or Municipal value.
Once we get the Gross annual value the next phase is to get Net annual Value.
Net annual value (NAV) is arrived after deducting 30% on Gross Anual value.
Phase 2 : Recognise your deductions
Deductions under this head is primarily governed by section 24 of Income tax act.
there are two clauses under this section 24.
one: if the house is self occupied
Two: If the house is let out
The duduction talks about interest on housing loan. That means if you have taken housing loan , you can claim deduction under this head.
If the house is used for purely self residential purposes, then the maximun amount that is allowable is Rs.150000.
If the house is used for let out then the maximum amount that you can claim is the actual amount you are paying the interest.. It can be of any value.
Phase 3: Calculate Tax
Once you arived at the income chargeable under this head, you have to club all other sources of Income and calculate tax accordingly.
Thank you

Wednesday, February 15, 2012

View your annual tax statement online...

Hi all,
as the finance year is going to end soon( we know it should end on 31/03/2012), the employers have started collecting investment details from employees so that they can deduct tax properly. Now again there will be heave rush for tax planning and filing of income tax returns for the assessment year 2012-13.

thanks to techno savy income tax department. we all know how simple the procedure is to file income tax... no intermediaries no third person.. just we have to log in to the website and file the returns.

well here some thing that is worth telling is like this. before filing our returns we can view our tax credits. that is to say we can see how much tax(TDS) has been deducted from us. this will be helpfull in filing your return.
In income tax account after you log in you can find tax credits.

So all you have to do is to get yourself registered into it. this is free and check your tax credits online.

In case if you want any help, do let me know.


Monday, August 30, 2010

Do you need to make provision of Income tax in books??

provision for income tax in books of accounts is required even if you have tds certificates supporting the calculated refund?

Yes, you will have to make provision . this is because, when you record tds certificates, you show them as assets.

when u will get refund you will have to genuinly show them against this asset.

Making Income tax provision is mandatory as per guidance note and accounting standard also suggests so.

As per schedule v of companies act, you will have to show separately in profit and loss account, any provision for income tax and provision for deferred tax.

Sunday, August 29, 2010

Help on Tax, Accounts, Audit: Interest On Delayed payment

Help on Tax, Accounts, Audit: Interest On Delayed payment: "Hi all. This to all your atention that if there is any delay in payment of TDS . Interest will be 3%. This 3% is calculated not from the day..."

Interest On Delayed payment

Hi all. This to all your atention that if there is any delay in payment of TDS . Interest will be 3%.
This 3% is calculated not from the day of due date till the day of payment but from the day of deduction till date of payment. per month is 1.5% and includes part of a month also.
Thus from the date of deduction till payment if it is exeeding a day you will have to give 2 months interest. That is 1.5% *2= 3%.

Deducting TDS is the responsibility of deductor and hense he is liable for interest.
Next time when you are deducting TDS make sure that you pay it before due date.

This for your information that TDS is to be deducted on payment or credit basis which ever is earlier and due date of depositing tds is 7th of every month. Except for 30th march it will be 31st May.

If you have any questions do let me know

Friday, August 27, 2010

Direct Tax Code

Hello every one. finally the Direct Tax Code that was open for public discussion passed in Loksabha. During monsoon season it will be presented in Rajyasabha.

As per the new tax scheme following are the tax slab for citizens

Upto Rs.200000/-  No tax
Rs. 200000-500000    10%
Rs.500000-1000000    20%
Rs.1000000 & above   30%

the corporate tax has been kept at 30%.

Do you have any querries....??