How to Clear Advance adjust with Capital account

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A business owner provided significant advances to two farmers for personal needs and supplies, which were not repaid. After legal action, the court ruled in favour of the farmers. The business owner is now seeking advice on how to adjust these unrecoverable advances in their books, specifically questioning if they can be charged to the capital account. An alternative suggestion is to write off the advances as unrecoverable and charge them to the profit and loss account.

Nisha Kathuria

Nisha Kathuria (Querist)
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23 September 2023 Dear Sir,

A person has engage a business of Agriculture product. he sold the crops on behalf of farmars in Grain market and get some commission. Some time he provided advances to farmers for their personal needs and purchase of some pesticides and fertilizers. so in this case owner had give Rs.1100000/- advance to A Farmer and Rs.432500/-to B Farmers. after some time owner ask to return back money or sold your Crops but both are ignore him and refused to return back money. in the end owner file a Court Case against A and B. again 1 year passed 7 to 8 herining Court have a decision in the favor of Mr. A and Mr. B
Now please suggest how to adjust Rs.1100000/- and 432500/-which show in books of accounts in Dr. Side .Can we adjust with Capital account.

Please advise Respected Sir,

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 September 2023 Charge it to p and l as unrecoverable advance write off.

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Nisha Kathuria

Nisha Kathuria (Querist)
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23 September 2023 Thank you Very much Sir,

please advise for below Query.

1. I have Short term Capital grain from MF and Stock so i have to selected Schlude of Long term & Short term both
2. I have sold mutual fund Rs.25200/- and Stock of Rs.46400/- so i have to add Rs.25200+46400 Rs. 71600 show in colum 111A Full Value of Consideration Rs.71600/-

3. I have purchase mutual fund Rs.26100/- and Stock of Rs.32900/- so i have to add Rs.26100 +32900 and put in Rs.59000/- cost of acquisition without indexation Rs .59000/- and then Capital gain short Term RS 12600/-

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CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 September 2023 Yes, you are right...
...

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