Ledger Scrutiny of Cash

CASH SCRUTINY REPORT

Checking Cash ledger in Tally is highly important task in ledger scrutiny and finalization of tally company. It involves assessment of applicability of Basic accounting principles, Income Tax Act provisions and rules.

Scrutiny for Applicability of Basic Accounting Principles

First thing, we need to check is credit balance of cash ledger on daily basis. According to basic accounting principles cash balance cannot be in credit (i.e. in negative) Ledger vision provides date wise report where ever cash ledger is in credit.

Also, in case of Individual/ HUF user can define maximum cash balance for auditee and if that cash balance is crossed by cash ledger on last date of audit period (i.e. closing balance of cash ledger) Ledger Vision flashes error showing amount of excess cash balance / and cash drawings during the audit period.

Scrutiny for Applicability of Income Tax Act 1961, Provisions and Rules

Income Tax Act imposes restrictions of cash transactions through Section 40(A)3, 269 SS/ 269 ST/ 269T

In simple words,

Under section 40A (3) any person cannot pay amount or total of amount in single day to any other person in excess of Rs 10,000/- (RS 35,000/- in case payment for transport expenses) in cash

Under section 269 SS any person cannot accept loan, deposit or any sum related to transfer of immovable property equal to Rs. 20000 or more from any other person. Contravention of Section 269 SS levies penalty of 100% of sum received.

Section 289 ST restricts any person from accepting cash equal to amount of Rs 2,00,000/- or more from any other person against single transaction or against transactions relating to one event or occasion. Penalty for violation of Sec 269 ST is sum equal to amount received by the person

Under Section 289 T any person can not repay the Loan or Deposit in cash if sum is more than Rs 20000 or more, again penalty is 100% of sum repaid.

In addition to Above provisions, as per Amendments in section 44AB as per Finance Act 2020 ,if cash receipts are more than 5% of total tally receipts or cash payments  are more than 5% of total tally payments, then as per turnover criteria , though person is not liable to tax audit, If he violets above provision of 5% cash receipt/ payment , he becomes liable for tax audit.

How LedgerVision takes care of Tax Audit violations??

LedgerVision has inbuilt rule engine which takes care of violation of above criteria. It provides report in tabular format with Section name, Section limit, date amount and narration which is very easy to read and understand.

Also LedgerVision provides another Cash Analysis report in tabular format for cash deposit / withdrawals from bank /OD/CC account and in addition it provides total cash receipts, total tally receipts, total cash payment, total tally payments. To see whether amendments of Sec 44 AB are applicable or not, so that one can easily decide applicability of Tax Audit.

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