10-28-2011, 07:34 PM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Information Consultant</i>
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it means if we have a vehicle mention in our wealth 2010 cost rs 950000 and sold it Rs 800000 and buy a new one Rs 1100000 .
We will mention in our wealth 2011 value of new vehicle .Am i right ?
should loss or gain is a part of reconcilation?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Loss or gain must be part of reconciliation statement. Reconciliation without showing capital gain or loss shows that wealth statement does not reflect the right position.
For example considering your above example. Mr. A has only car of Rs. 950 thousands in his wealth statement of Tax year 2010. He has no other asset in 2010.
As said by you, during 2011 he sold that car for Rs.800 thousand (i.e. at capital loss of 150 thousand rupees) Then he purchased another car of Rs.1100 thousand. It means that he must have invested extra 300 thousand to purchase vehicle of Rs.1100 thousand. Suppose again his only asset in Tax Year 2011 is car costing Rs.950 thousand and nothing else to show in wealth.
Suppose his personal expenses (including taxes, donations etc.)are 300,000. It has already been supposed that he has no asset other than car in wealth statement 2010 & 2011. It means that he would have zero balance of cash in hand as well as at bank in wealth statements for both the years.
Now prepare his cash account
Cash as on 30.06. 2010 0
Income during tax year 2011 600,000
<u>Add</u> sale proceeds of car 800000
<u>Less</u> Personal expenses 300,000
<u>Less</u> Purchase of car 1100000
Balance of Cash as on 30.06.2011 <b>zero </b>
Coming to Wealth Reconciliation statement.
Available data is
Wealth as on 30.06. 2010 [one car only] Rs.950,000
Wealth as on 30.06.2011 [one car only] Rs.11,00,000
Income for tax year 2011 Rs.600,000
Personal Expenses Rs.300,000
Column 3 of reconciliation statement should be equal to column 6 thereof
In other words
Wealth as on 30.06.2011 - Wealth as on 30.06.2010 = income - Expense
Substituting values from available data
1100000 - 950,000 = 600,000 - 300,000
150,000 = 300,000 [Equation is wrong. so the wealth reconciliation does not reconcile. Difference between wealth is not equal to income - expense]
To reconcile the wealth you must take into account loss on sale of car i.e. 150,000
11,00,000 - 950,000 = 600,000 - 300,000 - 150,000
150,000 = 150,000 [Now it reconciles. If there is capital loss it will be added to expenses, if there is capital gain it will be added to income, in the Wealth Reconciliation Statement]
<br />
it means if we have a vehicle mention in our wealth 2010 cost rs 950000 and sold it Rs 800000 and buy a new one Rs 1100000 .
We will mention in our wealth 2011 value of new vehicle .Am i right ?
should loss or gain is a part of reconcilation?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Loss or gain must be part of reconciliation statement. Reconciliation without showing capital gain or loss shows that wealth statement does not reflect the right position.
For example considering your above example. Mr. A has only car of Rs. 950 thousands in his wealth statement of Tax year 2010. He has no other asset in 2010.
As said by you, during 2011 he sold that car for Rs.800 thousand (i.e. at capital loss of 150 thousand rupees) Then he purchased another car of Rs.1100 thousand. It means that he must have invested extra 300 thousand to purchase vehicle of Rs.1100 thousand. Suppose again his only asset in Tax Year 2011 is car costing Rs.950 thousand and nothing else to show in wealth.
Suppose his personal expenses (including taxes, donations etc.)are 300,000. It has already been supposed that he has no asset other than car in wealth statement 2010 & 2011. It means that he would have zero balance of cash in hand as well as at bank in wealth statements for both the years.
Now prepare his cash account
Cash as on 30.06. 2010 0
Income during tax year 2011 600,000
<u>Add</u> sale proceeds of car 800000
<u>Less</u> Personal expenses 300,000
<u>Less</u> Purchase of car 1100000
Balance of Cash as on 30.06.2011 <b>zero </b>
Coming to Wealth Reconciliation statement.
Available data is
Wealth as on 30.06. 2010 [one car only] Rs.950,000
Wealth as on 30.06.2011 [one car only] Rs.11,00,000
Income for tax year 2011 Rs.600,000
Personal Expenses Rs.300,000
Column 3 of reconciliation statement should be equal to column 6 thereof
In other words
Wealth as on 30.06.2011 - Wealth as on 30.06.2010 = income - Expense
Substituting values from available data
1100000 - 950,000 = 600,000 - 300,000
150,000 = 300,000 [Equation is wrong. so the wealth reconciliation does not reconcile. Difference between wealth is not equal to income - expense]
To reconcile the wealth you must take into account loss on sale of car i.e. 150,000
11,00,000 - 950,000 = 600,000 - 300,000 - 150,000
150,000 = 150,000 [Now it reconciles. If there is capital loss it will be added to expenses, if there is capital gain it will be added to income, in the Wealth Reconciliation Statement]
