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Pramod Kumar B.K. (CA Articleship student)     31 May 2011

Advance paid to creditors

Dear CAclubindia users,

 

Please solve the following query

How to treat advance paid to creditors and advance received from debtors ?

In the following conditions:

1) In accounts i.e. (how to show in balance sheet)

2) In case of calculating 'Drawing Power'  when banks providing Cash credit or Over draft facility or renewal of the same.

Thanking you in advance.

 



 13 Replies

Rajnikant Vadigoppula

Rajnikant Vadigoppula (CA, CS And CMA Final)     31 May 2011

1. in accounts it will be shown as trade advances

2.in case of drawing power advance from Debtors should be deducted from other debtors and Advance from creditors should be deducted from other creditors

1 Like
CA ADITYA SHARMA

CA ADITYA SHARMA (CA IN PRACTICE )     31 May 2011

ADVANCE TO CREDITORS UNDER LOAN AND ADVANCES

AND ADVANCE FROM DEBTOR UNDER HEAD ADVANCE AGAINST SUPPLY

1 Like
U S Sharma

U S Sharma (glidor@gmail.com)     31 May 2011

advance from debtors - its part of liability side - head "advance from customers"

advance to creditors - its part of asset side - head " loans and advances"

for bank's drawing power, advance from debtors are liabilities, and advance to creditors are assets.

1 Like
CA Rakesh Garg

CA Rakesh Garg (Asst. MGR Taxation)     01 June 2011

Originally posted by : U S Sharma

advance from debtors - its part of liability side - head "advance from customers"

advance to creditors - its part of asset side - head " loans and advances"

for bank's drawing power, advance from debtors are liabilities, and advance to creditors are assets.
2 Like
Pradeep Kumar

Pradeep Kumar (Article, CA Final)     01 June 2011

 

Originally posted by : U S Sharma

advance from debtors - its part of liability side - head "advance from customers"

advance to creditors - its part of asset side - head " loans and advances"

for bank's drawing power, advance from debtors are liabilities, and advance to creditors are assets.
1 Like
 Kumar Babu.G

Kumar Babu.G (Chartered Accountant)     01 June 2011

I agree with Mr.Pramod Kumar

1 Like
Ravindra kumar

Ravindra kumar (student)     01 June 2011

 (1) Advance from debtors - it is the  part of liability side of balance sheet  -under  head "
       Advance from customers"

           Advance to creditors - it is th part of asset side of balance sheet - under head                "Loans and advances"

 

  

1 Like
Pramod Kumar B.K.

Pramod Kumar B.K. (CA Articleship student)     03 June 2011

Originally posted by : Pramod Kumar B.K.

Dear CAclubindia users,
 
Please solve the following query
How to treat advance paid to creditors and advance received from debtors ?
In the following conditions:
1) In accounts i.e. (how to show in balance sheet)
2) In case of calculating 'Drawing Power'  when banks providing Cash credit or Over draft facility or renewal of the same.

Thanking you in advance.
 

 

Thanks to one and all for solving my previous query.

Here I have another query which is continuation of my previous question No. 2nd.

Which of the following will have better presentation while calculating DP?

Whether advance paid to creditors should be deducted from total 'Creditors' of a company

                               Or

 Should be added to total debtors

Since while calculating DP there are only chances of Stock, debtors, Creditors, whatever we adjust, it should be adjusted within above said.  

                           And

Also for ‘advance received form ‘debtors’

 

Thanks in Advance !!

 

 

 

 

 

 

U S Sharma

U S Sharma (glidor@gmail.com)     03 June 2011

while calculating DP, Debtors less than 90 days are taken in accounts, and creditors balance is negative effect on DP.

as dedcucting the advance from suppliers from debtors does not make any change in creditablity . so the presentation should be in proper way, for all departments, not only for bank credit limits.

CA Hitesh Jain

CA Hitesh Jain (Partner)     28 March 2016

Dear Sir

In DP Calculation, in a case, the Debtors are becoming negative after adjusting advance. Where as the Company has considered the value as ZERO (but not negative). In my view, its wrong. Let me know your views.

 

 

U S Sharma

U S Sharma (glidor@gmail.com)     28 March 2016

negative values are liability and should be shown under advance from customers 

1 Like
CA Hitesh Jain

CA Hitesh Jain (Partner)     28 March 2016

So in DP calculation, the Debtors showing credit balance and creditors showing the debit balances shall also be considered. Correct me if I am wrong.

Sandeep Garg

Sandeep Garg (Consolidation and IndAS Application)     28 March 2016

Yes both should be considered. Its not correct to take them as zero.

1 Like

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