22 April 2015
One of our client was recognising his brokerage income on marketing agency from their single client of germany on actual receipts basis, and even not books debtors because of uncertainity of reliasation of amount from their clients. Now our client wants to books debtors but not with revenue for the f.y. 2013-14 & actually they filed legal case against him in german court. They want to pass entry like dr. Debtors Cr. Capital reserve/ or other account
But we cant credit revenue a/c, becoz if we'll do this then we have to pay tax on it and it is not certain that whether we'll get such amt in future or not.
Plz guide me, which entry we should pass to book debtors in our clients books.
24 April 2015
talking from accounts perspective only,
1. you will have to book sales.
2. you can provide for the doubtful debtors by creating a provision.
the entry suggested by your client is incorrect and should not be agreed to.'
with regards to taxation, even addition to capital reserve can be taxed! Further, it is suggested that you dont accept arbitrary shift from cash to accrual basis
CAclubindia
