neeraj
(CA)
(930 Points)
Replied 16 July 2012
i think reverse the payment entry and make a provsion for the same expense.
BRINDHA.K.R
(Audit Assisstant)
(50 Points)
Replied 17 July 2012
when the expense is incurred the entry is
Expense A/c Dr
to s. creditor ( concerned party) A/c
When the payment is made the entry is
S. Creditor A/c Dr
To Bank A/c
When the cheque is time barred (stale cheque)
Bank A/c Dr
To S. Creditor A/c
no other entries are required other than above.
RAHUL MAHAJAN
(CA)
(166 Points)
Replied 17 July 2012
| Originally posted by : BRINDHA.K.R | ||
 |
when the expense is incurred the entry is Expense A/c Dr to s. creditor ( concerned party) A/c When the payment is made the entry is S. Creditor A/c Dr To Bank A/c When the cheque is time barred (stale cheque) Bank A/c Dr To S. Creditor A/c no other entries are required other than above. |
 |
It's correct entries
CA MOHAMMED IRFAN
(Chartered Accountant)
(136 Points)
Replied 17 July 2012
Agreed with all of you......when the cheque become time barred your liability to pay never comes to an end so you need to pass 3rd entry as suggested by Miss Brindha K.R.....i,e
Bank A/c -Dr
To Creditors/Provision for Expenses
(Being payment is cancelled)
One thing you must bear in mind that you should not revese the entry for expense becouse the expense has been incurred in the relevant financial year so it has to be made expense for that financial year, however the paymentr may be deferred even to next year.
Dhiraj R Gupta
(G M Audit)
(22 Points)
Replied 08 September 2012
Agreed. But all the above imply in case where accounts are maintained on Mercantile Method. There are still numerous Govt. undertakings maintaining their accounts on 'Cash Method' where no provisions are made, no Sundry Creditors and/or Sundry Debtors are created, but the 'Receivables and Payables' are only disclosed in 'Notes to Accounts'. The payments are directly debited to Expenditure head.
In such case for time barred cheques two types of treatments may be given,
1) If there is possibility that the party may come for revalidation of the cheque, Debit bank account and Credit to separate head 'Stale cheque written back a/c' and show this head under 'Current Liabilities'.
2) If it is identified that there may not be claim in future for the cheque, Debit bank account and credit to concerned Expenditure head. Also concerned liability to be disclosed in the 'Notes to Accounts'
If the accounts pertain to a Branch Office receiving funds from head office for expenses, the amount so reversed as per item no.2 above, should be refunded to Head Office.
Md. Wasim Ansari
(Article)
(24 Points)
Replied 22 March 2014
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