Entry for advance received against asset forfeited

A/c entries 3598 views 4 replies

Dear All,

Please suggest me accounting treatment for advance received against capital asset and forfeited by Co.

Is it revenue in nature and should be shown in extraordinary income?

or is it a capital receipt and should be part of capital reserve?

Would be grateful, if you can please share facts, guidance notes etc. in support of your view, as mere views without logic will be of little help to me..

Many many thanks for your prompt replies.

Thanks & Regards,

Replies (4)

it is capital receipt because its against capital asset & its not ordinary activity. therefore it should transfer to Capital Reserve.

dear friend

there is no standards and guidance notes relevant to your query, the logical answer is as follow

If capital asset is fixed assets, it can not be the revenue income , but the extra-ordinary income. the advance received might  be for sale of capital capital and subsequently neither  transfer of capital asset take place nor refund of advance, so the entries is for writting off the advance in the statement of profot and loss account by passing the following entries

Advance from Mr. .................A/c .........................Dr.

       To Profit or loss a/c

(Being forfeiture of amount received in advance for sale of capital asset)

and should be shown as extraordinary income

 

If the person is engaged in the business of hire-purchase sale, this income may be in nature of operating activities

According to me, the income should form a part of capital reserve firstly as it is of a non recurring nature and secondly the income is much similar to that of a sale of capital asset in a very short span of time

Thanks to all for posting and sharing the views..

I Would request experts to please throw some light as two diferent opinions are there and consensus is difficult to reach..

 

Regards


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
Featured 28 March 2026
Accountant

Ashok Amol & Associates

New Delhi

B.Com

View Details
Company
Featured 28 March 2026
CA Final

Ashok Amol & Associates

New Delhi

CA Final

View Details
Company
Featured 13 April 2026
GST CONSULTANCY

Abhishek G Agrawal & Co.

Korba

CA Final

View Details
Company
Featured 14 April 2026
GST CONSULTANT

Abhishek G Agrawal & Co.

Korba

CA Final

View Details
Company
Featured 19 March 2026
Article Assistant

Gupta Sachdeva & Co. Chartered Accountants

New Delhi

CA Final

View Details
Company
Featured 14 March 2026
Article Trainee

N N V Satish&co

Hyderabad

CA Inter

View Details
Company
Featured 14 March 2026
Associate CA

N N V Satish&co

Hyderabad

CA

View Details
Company
Featured 12 March 2026
Customer Relationship Executive

TAXLET

Calicut

B.Com

View Details