General query on accounts

RAJESH KHANNA (SALES CUM ACCOUNT EXECUTIVE) (148 Points)

07 October 2016

WE ARE A PARTNERSHIP FIRM. ONE OF OUR DRIVER WORKED FROM 01.04.2016 TO 15.04.2016 AND TOOK SALARY ADVANCE OF RS. 2600/- AGAINST HIS TOTAL SALARY OF RS. 8000/- AND ASSURED TO RETURN FROM HIS VILLAGE. NOW MORE THAN 5-1/2 MONTHS HAVE GONE HE DID NOT RETURN TO OFFICE NOR INTIMATED AS TO WHETHER HE WILL COME OR NOT. THE FIRM HAS TERMINATED HIS SERVICES. HOW IN THE BALANCE SHEET SALARY ADVANCE OF RS. 2600 ON THE ASSEST SIDE IS APPEARING. PLEASE ADVISE HOW TO WRITE OFF THESE ADVANCES.

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4 Replies

CMA Poornima Madhava (CMA) (13097 Points)
Replied 07 October 2016

Since you say that the salary actually payable is 8000 (assuming that the employee has earned this) and advance of 2600 is paid, you may adjust the advance salary against the liability and show the balance liability under salary payable account.

RAJESH KHANNA (SALES CUM ACCOUNT EXECUTIVE) (148 Points)
Replied 07 October 2016

Thanks for your answer. But my question is that Company has terminated the servies of Driver for violating the company rules and he is not eligible to any benefit including his Balance payment of Salary. Please clarify then .How we can show balance amount of salary of Rs. 5400 i.e. ( Rs. 8000 - Rs. 2600) as payable in the Liability side of Balance Sheet when he is no longer employee of the company. It means the advance which is appearing in the assest side of balance sheet must be written off.Please advise how to write off.

CA Goutam Sharma (Chartered Accountant in Practice) (468 Points)
Replied 07 October 2016

write off the advance in profit and loss account as Advance written off..

mind one thing..

you will not get benefit of Bad debt in this case under Income Tax. while filing return ..you may claim it under residuary expenses.