CREDITORS SHOWING DEBIT BALANCE . PROPRIETOR SAID BILL WAS ALREADY SET OFF , BUT STILL SHOWING DEBIT BALANCE . WHAT TO DO ?
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Creditors showing debit balance [ URGENT]
Replies (8)
Quick Summary
Transfer it to capital Account
Thank You Sir
This is nice, what will happen if it is transferred to capital account? It will reduce a further amount in liabilities isn’t it?
Tax expense a/c 100
To Tax payable a/c 100
then,
Tax payable a/c 100
To Bank a/c 100
the debit balance must go away and if it is still there and debiting it to capital account will reduce liabilities by 100 understating the balance sheet liabilities. Correct me if I am wrong
Sorry use Purchases entry instead. The output is the same. Lol couldn’t see the question on my mobile while typing
If we write off the debit balance through profit and loss A/C, the same should be disallowed. It is not a allowable deduction.
The only way to remove such debit balance is by transferring it to capital account. Yes it will reduce the liability.
Second alternative is possible by writing off such debit balance through profit and loss A/C, but it should be disallowed.
The only way to remove such debit balance is by transferring it to capital account. Yes it will reduce the liability.
Second alternative is possible by writing off such debit balance through profit and loss A/C, but it should be disallowed.
Sounds plausible and hard to do both within the framework. The auditor has to remember this particular transaction. Better change the software.
As written over earlier reply
1st write off (it will treate as income as creditor a/c. dr to s.balances written off cr ) also it will not look correct why there is debit balance and why not done followup for bill/or reimburment of amount.
2nd adjust with capital account but it reduce capital balance
3rd ask proprietor to do follow up with supplier for bill if bill not recorded or ask supplier to return the advance he received as only 2 possibilities 1) bill not booked 2) excess amount is transferred against bill he generated or any discount you have considered which he not given/short record of bill ( on this point you can c/f balance to next year as advance to supplier/creditor with justification)
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