Golden Rules of Accounting To understand the Golden Rules of Accounting we must first understand the types of accounts. The account classification applies to all the types of general ledgers. In other words, every account will fall in one of the broad classifications given below. There are three typRead more
Golden Rules of Accounting
To understand the Golden Rules of Accounting we must first understand the types of accounts. The account classification applies to all the types of general ledgers. In other words, every account will fall in one of the broad classifications given below.
There are three types of accounts:
Real Account
Personal Account
Nominal Account
A Real Account is a general ledger account relating to Assets and Liabilities other than people accounts. These are accounts that don’t close at year-end and are carried forward. An example of a Real Account is a cash Account.
A Personal account is a General ledger account connected to all persons like individuals, firms and associations. An example of a Personal Account is a Ram’s Account.
A Nominal account is a General ledger account pertaining to all income, expenses, losses and gains. An example of a Nominal Account is an discount account.
Golden rules of accounting
As per the accounts type, the accounting rules have been defined. For each account there is a set of Golden Rules and hence there are three Golden Rules of Accounting. The Golden rules define the treatment of all transactions conducted by the business.
Type of account
Golden rules
Real Account
Debit – what comes in to the business
Credit – what goes out from the business
Personal account
Debit – the receiver
Credit – the giver
Nominal Account
Debit – the expenses or losses of the business
Credit – the income or gain of the business
Illustration An entity named Orange Ltd. has the following transactions.
Purchase goods worth Rs.50,000 from Shyam Ltd.
It deposits Rs.10,000 into Bank.
It sells goods worth Rs.35,000 to Ram.
It pays Rs.12,000 as salary.
It earns Rs.3,000 as interest on a bank account.
First of all, let us identify the accounts involved in these transactions and classify them into the different types of accounts:
A Trust which does not have registration u/s 12A and 80G of the Act can apply for provisional 12AB and provisional 80G registration. The case will fall in Section 80G(5)(vi) and the clause iv of the first proviso to the said section. The application may be made in Form 10 A with the required enclosuRead more
A Trust which does not have registration u/s 12A and 80G of the Act can apply for provisional 12AB and provisional 80G registration. The case will fall in Section 80G(5)(vi) and the clause iv of the first proviso to the said section.
The application may be made in Form 10 A with the required enclosures as stated under Rule 11 AA of Income Tax Rules.
However, since Sec 80G (5) talks about the registrations to Charitable Trusts established in India whose income is not liable to be included in total income under section 11,12 or clause 23 AA or 23 C of section 10, the first registration granted would be provisional registration u/s 12AB of the Act.
Clause (a) of the Proviso to Section 12A (2) clearly specify that if the existing Trusts / Institutions registered under Section 12A or 12 AA of the Act, apply for fresh registration u/s 12 AB of the Act before 30th June 2021, provisions of Section 11 and 12 shall apply to Trust/ Institution from thRead more
Clause (a) of the Proviso to Section 12A (2) clearly specify that if the existing Trusts / Institutions registered under Section 12A or 12 AA of the Act, apply for fresh registration u/s 12 AB of the Act before 30th June 2021, provisions of Section 11 and 12 shall apply to Trust/ Institution from the assessment year from which they were granted their earlier registration.
Section 12A (2) further clarifies that if the said time line of 1 st April to 30th June 2021 is not followed, the provisions of Section 11 and 12 shall apply to Trust/ Institution from the 1 st day of the financial year in which such application is made.
In short, within time application for fresh registration u/s 12 AB will register the Trust from the date on which it was originally registered u/s 12 A or Sec 12 AA. If the application for registration u/s 12 AB is made late that is after 30/06/2021, the registration u/s 12 AB will be granted for F Y 2021/22 and onwards.
Definition of “Person” as per section 2(31) of Income Tax Act,1961 “person" includes— (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificiaRead more
Definition of “Person” as per section 2(31) of Income Tax Act,1961 “person” includes—
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or not,
(vi) a local authority, and
(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.
The word “person” is a very broad term that in itself includes the following:
1. Individual – It refers to a natural human being whether male or female, minor or major.
Example – Mr. Manish Gupta
2. Hindu Undivided Family- Under Hindu Law, an HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. An HUF cannot be created under a contract, it is created automatically in a Hindu Family. The manager of HUF is called “Karta” and its members are called ‘Coparceners’.
Example – Mantri parivar with Mr. Vikas, his wife, his brother and his brother’s wife
3. Company. Company means-
(i) any Indian company registered under Indian Companies Act 1956
(ii) any body corporate incorporated by or under the laws of a country outside India, or
(iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922) or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or
(iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company:
Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971 or on or after that date) as may be specified in the declaration;
Example – Tata Motors Ltd.
4. Firm – Section 2(23)(i) of the Income-tax Act, 1961 takes the meaning of the “firm ” from Indian Partnership Act, 1932. Section 4 of the Indian Partnership Act, 1932 defines firm as under:
“Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”.
The firm shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008. Section 2(1)(n) of the Limited Liability Partnership Act, 2008 defines “limited liability partnership” as a partnership formed and registered under the Act.
Example – Mantri & Company. (CA firm)
5. Association of Persons (AOP) or Body of Individuals (BOI)- AOP or BOI shall be deemed to be a person, whether or not, they were formed or established or incorporated with the object of deriving income, profits or gains.
When persons combine together to carry on a joint enterprise and they do not constitute partnership under the ambit of law, they are assessable as an association of persons. There must be common purpose, and common action to achieve common purpose i.e. to earn income.
An AOP can have firms, companies, associations and individuals as its members.
A body of individuals (BOl) cannot have non-individuals as its members. Only natural human beings can be members of a body of individuals.
Whether a particular group is AOP. or BOl. is a question of fact to be decided in each case separately.
Example – Goregaon Sports Club (BOI)
Example – Markfed (AOP)
6. Local Authority. Municipality, Panchayat, Cantonment Board, Port Trust etc. are called local authorities.
Example – A Village Panchyat.
7. Artificial Juridical Person. A public corporation established under special Act of legislature and a body having juristic personality of its own are known to be Artificial Juridical Persons. Universities are an important example of this category.
Example – Rajasthan University
What are the golden rules of accounting?
Golden Rules of Accounting To understand the Golden Rules of Accounting we must first understand the types of accounts. The account classification applies to all the types of general ledgers. In other words, every account will fall in one of the broad classifications given below. There are three typRead more
Golden Rules of Accounting
To understand the Golden Rules of Accounting we must first understand the types of accounts. The account classification applies to all the types of general ledgers. In other words, every account will fall in one of the broad classifications given below.
There are three types of accounts:
Real Account
Personal Account
Nominal Account
A Real Account is a general ledger account relating to Assets and Liabilities other than people accounts. These are accounts that don’t close at year-end and are carried forward. An example of a Real Account is a cash Account.
A Personal account is a General ledger account connected to all persons like individuals, firms and associations. An example of a Personal Account is a Ram’s Account.
A Nominal account is a General ledger account pertaining to all income, expenses, losses and gains. An example of a Nominal Account is an discount account.
Golden rules of accounting
As per the accounts type, the accounting rules have been defined. For each account there is a set of Golden Rules and hence there are three Golden Rules of Accounting. The Golden rules define the treatment of all transactions conducted by the business.
Credit – what goes out from the business
Credit – the giver
Credit – the income or gain of the business
Illustration An entity named Orange Ltd. has the following transactions.
First of all, let us identify the accounts involved in these transactions and classify them into the different types of accounts:
Shyam Ltd. Account
Personal Account – Creditors account
Credit the giver
Cash Account
Real Account – Asset account
Credit what goes out from the business
Ram Account
Personal Account – Debtors Account
Credit the income or gain
Bank Account
Real Account – Asset account
Credit what goes out of business
Bank Account
Real Account – Asset Account
Credit the income or gain
See lessWhether a Trust or Institution which does not have registration u/s 12A and 80G of the Act can apply for provisional 12AB and provisional 80G registration simultaneously?
A Trust which does not have registration u/s 12A and 80G of the Act can apply for provisional 12AB and provisional 80G registration. The case will fall in Section 80G(5)(vi) and the clause iv of the first proviso to the said section. The application may be made in Form 10 A with the required enclosuRead more
A Trust which does not have registration u/s 12A and 80G of the Act can apply for provisional 12AB and provisional 80G registration. The case will fall in Section 80G(5)(vi) and the clause iv of the first proviso to the said section.
The application may be made in Form 10 A with the required enclosures as stated under Rule 11 AA of Income Tax Rules.
However, since Sec 80G (5) talks about the registrations to Charitable Trusts established in India whose income is not liable to be included in total income under section 11,12 or clause 23 AA or 23 C of section 10, the first registration granted would be provisional registration u/s 12AB of the Act.
See lessAll existing Trusts / Institutions registered under the Act have to compulsorily apply for fresh registration u/s 12 AB of the Act before 30th June 2021. If any registered Trust fails to apply before the said date (or applies beyond the said date) for fresh registration u/s 12 AB of the Act, what will be the consequences?
Clause (a) of the Proviso to Section 12A (2) clearly specify that if the existing Trusts / Institutions registered under Section 12A or 12 AA of the Act, apply for fresh registration u/s 12 AB of the Act before 30th June 2021, provisions of Section 11 and 12 shall apply to Trust/ Institution from thRead more
Clause (a) of the Proviso to Section 12A (2) clearly specify that if the existing Trusts / Institutions registered under Section 12A or 12 AA of the Act, apply for fresh registration u/s 12 AB of the Act before 30th June 2021, provisions of Section 11 and 12 shall apply to Trust/ Institution from the assessment year from which they were granted their earlier registration.
Section 12A (2) further clarifies that if the said time line of 1 st April to 30th June 2021 is not followed, the provisions of Section 11 and 12 shall apply to Trust/ Institution from the 1 st day of the financial year in which such application is made.
In short, within time application for fresh registration u/s 12 AB will register the Trust from the date on which it was originally registered u/s 12 A or Sec 12 AA. If the application for registration u/s 12 AB is made late that is after 30/06/2021, the registration u/s 12 AB will be granted for F Y 2021/22 and onwards.
See lessWho is a person as per Income Tax Act?
Definition of “Person” as per section 2(31) of Income Tax Act,1961 “person" includes— (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificiaRead more
Definition of “Person” as per section 2(31) of Income Tax Act,1961 “person” includes—
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or not,
(vi) a local authority, and
(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.
The word “person” is a very broad term that in itself includes the following:
1. Individual – It refers to a natural human being whether male or female, minor or major.
Example – Mr. Manish Gupta
2. Hindu Undivided Family- Under Hindu Law, an HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. An HUF cannot be created under a contract, it is created automatically in a Hindu Family. The manager of HUF is called “Karta” and its members are called ‘Coparceners’.
Example – Mantri parivar with Mr. Vikas, his wife, his brother and his brother’s wife
3. Company. Company means-
(i) any Indian company registered under Indian Companies Act 1956
(ii) any body corporate incorporated by or under the laws of a country outside India, or
(iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922) or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or
(iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company:
Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971 or on or after that date) as may be specified in the declaration;
Example – Tata Motors Ltd.
4. Firm – Section 2(23)(i) of the Income-tax Act, 1961 takes the meaning of the “firm ” from Indian Partnership Act, 1932. Section 4 of the Indian Partnership Act, 1932 defines firm as under:
“Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”.
The firm shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008. Section 2(1)(n) of the Limited Liability Partnership Act, 2008 defines “limited liability partnership” as a partnership formed and registered under the Act.
Example – Mantri & Company. (CA firm)
5. Association of Persons (AOP) or Body of Individuals (BOI)- AOP or BOI shall be deemed to be a person, whether or not, they were formed or established or incorporated with the object of deriving income, profits or gains.
When persons combine together to carry on a joint enterprise and they do not constitute partnership under the ambit of law, they are assessable as an association of persons. There must be common purpose, and common action to achieve common purpose i.e. to earn income.
An AOP can have firms, companies, associations and individuals as its members.
A body of individuals (BOl) cannot have non-individuals as its members. Only natural human beings can be members of a body of individuals.
Whether a particular group is AOP. or BOl. is a question of fact to be decided in each case separately.
Example – Goregaon Sports Club (BOI)
Example – Markfed (AOP)
6. Local Authority. Municipality, Panchayat, Cantonment Board, Port Trust etc. are called local authorities.
Example – A Village Panchyat.
7. Artificial Juridical Person. A public corporation established under special Act of legislature and a body having juristic personality of its own are known to be Artificial Juridical Persons. Universities are an important example of this category.
See lessExample – Rajasthan University