Written off item

If we have not paid the amount to our creditors and we just write off that amount ...
can we show this as our income under profit and loss a/c under indirect income????
Replies (4)
Quick Summary
This discussion explores whether writing off unpaid creditor amounts can be recognised as indirect income on a profit and loss account. It clarifies the accounting entries required, including booking the initial expense, writing off the creditor balance, and finally transferring the written-off amount to the P&L as income. The general practice is to write off after a period, but current regulations should be checked.

The entry would be sundry creditors A/c Dr
to Discount received A/c and that is an indirect Income. so your liablity would be directly added to your Capital just by defaulting creditors!!
What is written off account and example of it

@ Ramya  Bhat 

Normally  we write-off  after 3 to 4 years but  you check out  current rule regarding  write -off   and then   you pass  entries as follows  to write-off  creditors 

1)  your first  entry  in the  Books before write -off 

     Expense                      A/c       Dr 

     To Trade  Creditors     A/c       Cr 

(  Booking  entry ) 

 

2)  When you are going  to write-off 

     Trade  Creditors                         A/c       Dr 

     Trade  Creditors written -off        A/c      Cr 

(  Creditors  write off  )  

 

3) Trade creditors write-off  Transfer  to profit & loss   Account  as Indirect  Income 

     Trade Creditors written-off         A/c     Dr 

     To  Profit  &  Loss                      A/c     Cr 

( Transfer  to profit  & Loss  A/c  as  Income )  

Trade creditors write off  A/c   will be under head  Indirect  Income (  P&L account )  

     

Thank a lot.....

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