A Company follows Accrual basis of accounting for recording income from both domestic and foreign clients for selling goods (furniture, etc).

However, in recent times there has been uncertainty regarding payment from parties in Afghanistan, Nigeria etc. The company had to make provision for bad debts/write off the bad debts frequently as per the audit observations on the ground of uncertainty of realisation.

However, constant follow up for realisation of the payment continued and in some cases, the company realised the payment after an abnormally long period.

Recognition of income due to receipt of these payments used to create confusion as to whether these should be treated as current year’s income or prior period income.

Hence, the company now accounts for this foreign income on cash basis and also has started writing off amount from such foreign parties if not receivable at all. Can the company do the same??

Kindly clear the doubts.

Regards

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PLS SUGGEST ME ....

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