Creditors balance

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preeti (Querist)
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13 June 2013
In course of audit, the auditor found credit item of Rs 5lac on enquiry the auditor was informed that (1) This was very old credit balance and (2) the creditor had not approached for payment , Beside the creditor could not be traced and therefore , confirmation of credit balance was not available .

How this will be dealt as an auditor ?

regards,
preeti

CA. RICHI SAXENA

CA. RICHI SAXENA (Expert)
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14 June 2013 Such creditors should be written off in the books.
As and when it is confirmed that payment will not be required to be made to a creditor at that point a special item should be introduced in the p&l and creditor should be debited.
Special item is required so that no confusion arises among gross margin comparatives...
The entry should have been to Debit the creditor and to credit the p&l.
This item being in the favour of the entity there lies no necessity to point out this issue in the Audit report.. The entity should be informed that they should write about this factor in Notes To Accounts till the date they pass the above given entry.

CA. RICHI SAXENA

CA. RICHI SAXENA (Expert)
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preeti

preeti (Querist)
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14 June 2013

Thank you very much !

regards,
preeti

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