English, asked by sakshikadam812003, 2 months ago

what is black money and how is it produced

Answers

Answered by shaheenarshi427
3

Explanation:

How Black Money Works. In its simplest form, black money is money on which tax is not paid to the government. ... The sellers in both examples have earned money from legal sources but evaded taxes. The most common source of black money is the black market or underground economy.

Answered by payalchatterje
0

Answer:

Black money :

Black money includes all funds earned through illegal activities and otherwise legal income that is not reported for tax purposes. Black money receipts usually come in cash from underground economic activities and as such are not taxed. Recipients of black money have to hide it, spend it only in the shadow economy, or try to give it a semblance of legitimacy through money laundering.

Production of black money:

Now that we have a clear idea of what black money is. (If not, ask again, I'll try to expand on it to the best of my knowledge.)

Generating black money is not easy.

This is one company that on paper was in the red for over 20 years. As auditors, I took a closer look at how they operated for so long? These were production issues. There were 8 machines in their factory. The office and the factory were in the same premises, an excuse to just walk around after a heavy lunch was enough to check everything.

Remember, a business works on this simple concept - buy raw materials -> process -> sell above purchase price and processing costs -> profit. If the sale does not exceed the purchase price and the cost of the process, it is a loss.

So profit/(loss) = sales – (purchases + cost)

This particular company showed fewer purchases and sales for books. Which was enough to show the losses. And the rest of the buying and selling was done in cash.

The following two things raised suspicion, the actual production was much higher than the purchases shown in the book. And there were more items in the ending inventory than in the ending inventory report.

Basically, they engaged in cash purchases and cash sales in parallel. A parallel business concept was cash profit = cash sales - cash purchases. Other business was in loss. These losses were used for I-T profits.

Basically, they take away all the profits the company makes. The net profit of their industry was 17% and the total turnover was close to 36 kroons. Let us assume that their unaccounted sales were approximately Rs. 50 cr, so close to Rs. 8.5 kr was their profit. That is, the saving is Rs. 2.55 kr with tax evasion.

It was my first audit. More such audits and practices followed. And then realized that this is the norm among companies.

Think about it, the above company bought raw materials from one company, this business also sold black, so this company also had black money.

Money related more maths:

1)https://brainly.in/question/48873196

2)https://brainly.in/question/9097825

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