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Writing off creditors
A firm has written off the creditors and added the same in capital of the firm saying that they have done settlement with creditors. Is it correct sir. Kindly guide.
Replies (7)
Quick Summary
No
It should be shown as income as creditors written back. Directly showing it in capital account is leading to evasion of tax.
It should be shown as income as creditors written back. Directly showing it in capital account is leading to evasion of tax.
Thank you sir. I request to further clarrify as why it is Income.
Bcoz,
it's wrote as expenses in PYs ...
So, It's reversed as income...
it's wrote as expenses in PYs ...
So, It's reversed as income...
Creditor aren't expense it's a liability.
creditor can be written off subject to some conditions.
creditor can be written off subject to some conditions.
Dr. Creditor
Cr. Gain from creditors written off
The original transaction was a revenue expenditure. So the reversal transaction will also be a revenue income.
Writing off creditors
is certainly an income . But it's a balance sheet item.
is certainly an income . But it's a balance sheet item.
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