Accounting of exp. paid waivd off

You will be required to write-back the expense by posting the below entry in the current F.Y.:

party A/C    Dr            800000

To- Sundry creditor's written back                800000

As it was booked as an expense to P&L in the previous year, no need to adjust it against the Advance.

As u mentioned in ur question that the amount of expenditure paid to  the party in previous year & the party has waived off in current year , it means the service is expected to get in current year from the party & party has waived off in current year so in prevoius year it should be treated as advance & no further adjustment need to be done in current year .

entry in previous year

1) Advance to party A/c    Dr.        8L

         To Cash                                        8L

If the party had provided the service in current year then this following entry would have passed

2) Expenses A/c Dr. 

         To Advance to party 

& consequently expenses amount would transferred in P/L

but becoz it did not happen so we have no need to passthe entry no.2

Thanks Shivam and Giridhar for your replies.

While making the payment in previous 4 yrs we booked like this

Expense A/c Dr. 2 lakhs

     TO cash Cr. 2 lakhs

Since the party waived off the exp... till 2010... Party has to pay back 8 Lakhs .. which they will not pay in cash... I ahve adjust against the payble amount from 2011 .. yearly 2 Lakhs .. How to account this?

The entry will be as under

Bank A/c                                          Dr 8.00 Lacs

 To Sundry balance write off/back Cr 8.00 Lacs

The other question is how on earth the payment was made in cash in the first place????

now it has to be booked by crediting other income (if its related to non related with main business activity
) & debiting by bank a/c/journal whatever applicable.