Audit

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relig (Querist)
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02 June 2009 1.A client had purchased a fixed asset in 2005, but the supplier didn't turn up to collect his cheque.The amount is outstanding till date and depreciation has been charged till date.There is no possibility of the supplier turning up.What should be done in such case?
2.What is the treatment if fixed asset is recorded twice and depreciation has been claimed on both these assets.What entry needs to be passed to rectify the account?

CA Anisha Ray

CA Anisha Ray (Expert)
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05 June 2009 1) I believe the amount to be paid to supplier is currently appearing as Creditors in ur Books, since there is no chance that the supplier will turn up, U will simply have to pass an entry

Suppliers Account....Dr.
To Creditors Written off A/c

Creditors Written off A/c will be an income Account and will reflect on the Credit side of ur P&L Account.

2. U will have to deduct the WDV of the asset from the Fixed Asset and credit to P&L Account in the current year.

Effect of Depreciation claimed in earlier years can be negated by taking it as a prior period item in the current year.

relig

relig (Querist)
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06 June 2009 Thank you

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