Bad Debts and Dr. bal w/o

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CA.Aman Dugar (Querist)
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11 June 2008 What is the difference between bad debts and Sundry dr. balances written off.
Should these accounts be maintained separately?If yes, why?

Shyam Lal Naik

Shyam Lal Naik (Expert)
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11 June 2008 Bad debts are irrecoverable amounts. Amount involved is resonably significant. When efforts made to realise the amt fails, or it is considered that, such effort will not yeild desired reasult, the amt is treated as bad debt.

Dr. balances w/off(often used term is sundry balance w/off) is writting off of small/petty balances.

Since nature of both type of transaction are different, separate accounts should be kept.

More over, allowability of both type of expense are governed by different sections under IT Act.

CA.Aman Dugar

CA.Aman Dugar (Querist)
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11 June 2008 Can you please mention the relevant sections of IT Act for both items..

Shyam Lal Naik

Shyam Lal Naik (Expert)
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11 June 2008 Bad Debts = (Sec. 36(1)(vii)
The other is residuary section = 37

CA.Aman Dugar

CA.Aman Dugar (Querist)
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12 June 2008 Thanks

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