Writing off of fictitious assets (Accounts)

This query is : Resolved

( Author )
29 May 2012

Hi all

As a statutory auditor of a pvt ltd company I want to know accounting treatment of the fictitious assets say receivables waived off by debtor , pyts made to vendors in advance which co could not recover now presented in the B/s from past five years. The amount is huge of around 55 lakhs (debit).

Can any one suggest how the same is to be dealt with and tax effect thereon & relevant Company Act provisions applicable (if any).

Replies could be mailed to kirtigkulkarni@gmail.com

CA CS Amit S. Kedia

( Expert )
29 May 2012

If the balances in debtors and advance given to vendors are from several years and is not recoverable any more, then you can write off such amounts in the books of accounts.
The same can be claimed as deduction under section 36(VII) of income tax Act.

Accounting treatment for the same is as follows-

1.Sundry Balances Written off Dr
To Party's A/c
2.Bad debts A/c Dr
To Advance givem to vendors A/c