A person purchase property in July 2019 and paid down payments of Rs. 500,000. Further he has to pay installments of Rs. 100,000 per month (25 installments) starting from August 2019. Total cost of the property is 3,000,000. How to reflect the above transaction in wealth statement for tax year 2020?
Solution:
| Down payment paid | Rs. 500,000 |
| Total installments paid during the year (From Aug 2019 to June 2020) | Rs. 1100,000 |
| Total amount paid during the year | Rs. 1600,000 |
| Amount remaining | Rs. 1400,000 |
In wealth statement, there are two ways to reconcile the above treatments
First method:
| Record full cost of the asset | (7002) | Rs. 3000,000 |
| Show Liability | (7021) | Rs. 1400,000 |
| For reconciliation, decrease the bank/cash account of | Rs. 1600,000 |
Second method:
Only show the amount of assets you have paid till the end of tax year 2020 in the code tab (7002) i.e. Rs. 1600,000 and credit bank or cash for reconciliation
Conclusion:
Both methods are right in the understandings of tax ordinance but the first method is more preferable and simplistic to reconcile the amount of asset