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Sundry creditors written off (Income Tax)

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This query is : Resolved


( Author )
28 December 2011

Dear sir,


How will affect the sundry creditors written off to the total tax liability?
IF I HAVE TO WRITE OFF RS.800000/- THEN HOW CAN I DO THAT


Siddhartha Bhardwaj

( Expert )
28 December 2011

Sundry creditors written off results in income.

If sundry creditors are in respect of expenditure, i.e., purchases, such a treatement shall result in business income and shall be taxable in the hands of the assessee under Section 41(1) of the Income Tax Act.

If however, advance received from a party is written off, then the same is not taxable.


SHYAMLAL KAYYARUVATH

( Author )
28 December 2011

IF I HAVE TO WRITE OFF RS 800000/-(SUNDRY CREDITORS)HOW CAN I DO THAT?


CA Pramod Jain

( Expert )
28 December 2011

sundry bal w/off debit 800000
sundry creditor credit 800000


Siddhartha Bhardwaj

( Expert )
28 December 2011

Dear CA Pramod Jain, the entry that you have suggested is incorrect.

Sundry creditors is already a credit balance. It will be debited for writing off the balance.

The correct entry will be as under:

Sundry Creditors A/c Dr. Rs. 8,00,000
To Balance Written Off Rs. 8,00,000

Balance written off will be treated as income and will be credited to Profit & Loss A/c.


CA Pramod Jain

( Expert )
29 December 2011

yes my mistake mr.siddartha is right.


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