Advance for supply of goods

Dear Members

If company has received advance for supply of goods and the advance is lying unadjusted for more than one year, it is a 'deposit' under deposit rules, 2014.

Apart from DPT-3 filing, is there any other compliance needed?

Please advise.

Regards

CA CS Dipjyoti Majumdar

Replies (1)

When a trade advance remains unadjusted for over 365 days, it legally transforms into a deposit under the Companies Act, 2013. Aside from declaring it in Form DPT-3, the most critical issue is that it likely constitutes an illegal public deposit under Section 73 if it was received from a non-member. Necessary actions include executing an immediate refund or adjustment, reclassifying the amount in the financial statements, making mandatory disclosures in the Director's Report, facing adverse reporting by auditors under CARO 2020, and potentially filing for compounding of the offence to mitigate penal risks.

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