Money Sutras

29/03/2023

On money

Money is an object that has a value placed on it, which allows for the trade of goods and services. Paper money is more common in the…

28/11/2020

Income tax returns growth rate -63.2% when compared to last year till OCTOBER

03/07/2020

Mr. X person purchased clothes from a shop as purchases were above specified monetary limit, hence was given certain number of price coupons under a scheme.Mr. X won first prize on lot being one KG Gold. On Production of coupon, assessee was issued 600 gms of gold coins and balance deducted being 40% of the Prize money by the Shop keeper.u/s 194B of the IT ACT. The One kg of gold coins was valued at Rs. 4 lakhs and total tax deducted at source including surcharge was Rs. 1.88 lacs. Mr. X filed return of income declaring total income at Rs.Nil, claiming refund of Rs.1,88 lacs being tax deducted from the gift value of Rs.42 lakhs given to X. AO held that assessee's first price of one kg gold was nothing but winning from lottery and was thus chargeable to tax as per rates provided in Section 115BB and tax had been rightly deducted by the shop owner.
Held AO is not justified in taxing the gift value.as " there is no intention to Participate" Explanation to section 2(24)(ix) were absent.
Rajamohan V.V., Kumbalappali Vs ITO (2020) 172 ITR TR (A) 404 (cochin-Trib),

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02/09/2019

Capital Expenditures


A capital expenditure is the purchase of an item that’s considered a long-term investment, such as computer systems and equipment. Most companies follow the rule that any purchase over a certain dollar amount counts as a capital expenditure, while anything less is an operating expense. Operating expenses show up on the income statement, and thus reduce profit. Capital expenditures show up on the balance sheet; only the depreciation of a piece of capital equipment appears on the income statement.

02/09/2019

Financial intelligence means understanding where the numbers are “hard”—well supported and relatively uncontroversial—and where they are “soft”—that is, highly dependent on judgment calls. What’s more, outside investors, bankers, vendors, customers, and others will be using your company’s numbers as a basis for their own decisions. If you don’t have a good working understanding of the financial statements and don’t know what those folks are looking at or why, you are at their mercy.

02/09/2019

Operating Expenses Operating expenses are the costs that are required to keep the business going day to day. They include salaries, benefits, and insurance costs, among a host of other items. Operating expenses are listed on the income statement and are subtracted from revenue to determine profit.



Xerox had clearly lost its way and was trying to use accounting to cover up its business failings. But you can see the point here: there’s plenty of room, short of outright book-cooking, to make the numbers look one way or another.


A second example of the artful work of finance—and another one that played a huge role in recent financial scandals—is determining whether a given cost is a capital expenditure or an operating expense. We’ll get to all the details later; for the moment, all you need to know is that an operating expense reduces the bottom line immediately, and a capital expenditure spreads the hit out over several accounting periods. You can see the temptation here. Wait. You mean if we take all those office supply purchases and call them “capital expenditures,” we can increase our profit accordingly? This is the kind of thinking that got WorldCom into trouble. To prevent such temptation, both the accounting profession and individual companies have rules about what must be classified where. But the rules leave a good deal up to individual judgment and discretion. Again, those judgments can affect a company’s profit, and hence its stock price, dramatically.

02/09/2019

Nor is this example merely hypothetical. Witness Xerox, which played the revenue recognition game on such a massive scale that it was later found to have improperly recognized a whopping $6 billion of sales. The issue? Xerox was selling equipment on four-year leases, including service and maintenance. So how much of the price covered the cost of the equipment, and how much was for the subsequent services? Fearful that the company’s sagging profits would cause its stock price to plummet, Xerox’s executives decided to book ever-increasing percentages of the anticipated revenues—along with the associated profits—up front. Before long, nearly all the revenue on these contracts was being recognized at the time of the sale.

02/09/2019

The income statement shows revenues, expenses, and profit for a period of time, such as a month, quarter, or year. It’s also called a profit and loss statement, P&L, statement of earnings, or statement of operations. Sometimes the word consolidated is thrown in front of those phrases, but it’s still just an income statement. The bottom line of the income statement is net profit, also known as net income or net earnings.



Imagine, for instance, that a company sells a customer a copying machine, complete with a maintenance contract, all wrapped up in one financial package. Suppose the machine is delivered in October, but the maintenance contract is good for the following twelve months. Now: how much of the initial purchase price should be recorded on the books for October? After all, the company hasn’t yet delivered all the services that it is responsible for during the year.