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Writing off creditors

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Student
170 Points Posted on 13 January 2024
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.
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On 13 January 2024 at 21:54 Report
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GST Consultant
15986 Points Posted on 13 January 2024
No
It should be shown as income as creditors written back. Directly showing it in capital account is leading to evasion of tax.
2 Reply
On 13 January 2024 at 22:04
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Student
170 Points Posted on 13 January 2024
Thank you sir. I request to further clarrify as why it is Income.
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On 13 January 2024 at 22:10
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"Do the Right Thing...!!!"
128152 Points Posted on 13 January 2024
Bcoz,
it's wrote as expenses in PYs ...
So, It's reversed as income...
2 Reply
On 13 January 2024 at 22:39
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Profession Business
28207 Points Posted on 13 January 2024
Creditor aren't expense it's a liability.
creditor can be written off subject to some conditions.
1 Reply
On 13 January 2024 at 23:44
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Finance
4584 Points Posted on 15 January 2024

Dr. Creditor

Cr. Gain from creditors written off

 

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On 15 January 2024 at 06:41
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Practising CA
8954 Points Posted on 15 January 2024
The original transaction was a revenue expenditure. So the reversal transaction will also be a revenue income.
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On 15 January 2024 at 22:09
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Profession Business
28207 Points Posted on 17 January 2024
Writing off creditors
is certainly an income . But it's a balance sheet item.
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On 17 January 2024 at 16:43


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