Most Common way to deal with your unaccounted money.

Entire nation is in a big shock after the demonetization in the country.  People holding unaccounted cash are started looking for loopholes for converting their black money into white.This practice is running in entire nation but Kolkata Chartered firms has got brand image for money laundering practices.

Cash-in-Hand

This is not just another current asset lies on the asset side of the balance sheet , people can do a lot with it. Cash-in-hand balance, one of the oldest tricks in accounting and transaction to convert black into white.

It's a simple game where seasoned chartered accountants and money brokers bring together two kinds of people: one, with excess, unexplained cash and the other having shortage of it.

In Kolkata and rest of the India, there are small firms whose books show large "CASH in HAND" but actually hold very little physical cash. These are companies which have spent their earnings and fund withdrawals from banks for personal uses and bribes. These expenses are not recorded in their books of accounts. Though their books show 'Cash in Hand' they don't really have the cash as it has been used in activities that is difficult to accounted for.

They are the perfect match for people and businesses who are looking for avenues to salvage their hidden notes of Rs.500 and Rs.1000/-.

How these practices are running on ?

Entire process of conversion goes on in following 6 steps.

1.  One looking to offload cash- Let's call it Shrawan Ltd .. gives the money to Prince Ltd. (here Prince Ltd. have bogus Cash-in-hand in his books of accounts.
2.  Prince Ltd. deposits the money in its bank account. (No questions are asked as it had earlier withdrawn cash from the bank or generated legitimate income.
3. Prince Ltd issues a cheque in favour of Shrawan Ltd. (This is just a fund transfer which is to be shown as loan or may be advance)
4. It's a loan that has to be repaid.
5. It would be paid back after a decent interval. The repayment happens with Shrawan Ltd writing a cheque to Prince Ltd. The principal amount is repaid along with the interest/service charge.
6. The transaction is complete when Prince Ltd simultaneously returns cash to Shrawan Ltd may be this last leg of the transactions will be with the new 2000/1000/100 rupees currency notes that government.

How innocent people are fooled using this trick ?

Some business minded people are playing with the poor people. They are depositing cash in low income people's account and take a cheque from them. Those innocent people have no idea that they are also involved in converting black money into white.

These transactions are organised in a such a legal way that even government can not track whether it is a bogus transaction or a genuine legal transaction.
Government should amend their system and rules so that these transactions can be caught easily.

Jai Hind.