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Debt not recoverable

Smruti (CA) (183 Points)

30 October 2013

Hello Friends...

Some debts relating to previous years are not recoverable, however other dues from the same party has already been received from the same party. so what will the accounting treatment.

Thank you

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4 Replies

Sandeep Garg (Consolidation and IndAS Application) (1056 Points)
Replied 30 October 2013

If the debts are of revenue nature and no possibility of recovery is there, it will charged to P&L as bad debts. However, if chances of recovery are there, it will be reclassified as doubtful debts and 100% provision for doubtful debts is to be created.

If the debts are of Capital nature, it will be a capital loss.

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Smruti (CA) (183 Points)
Replied 31 October 2013

the debt is revenue i nature.

let me clarify my doubt. suppose there were 10 bills amounting Rs.1 croce in 2011-12. out of that party is not ready to pay Rs. 20 lakh, because the party is not accepting our invoice relating to that amount. sale could not be reversed in that year. now what will be accounting treatment

Sandeep Garg (Consolidation and IndAS Application) (1056 Points)
Replied 31 October 2013

Pls also explain the nature of revenue i.e. whether it is sales of goods or rendering of services. If it is sales of goods, whether the goods were returned by customer or not. In other case whether you are required to provide the services again or not.