If a indian co. purchase a fixed assets for Rs.4.5 crore on credit from a forign co.but after 2 yr that forign co. is insolvent and did not claim his amt.
I want to know what is entry as per AS(accounting standard) and wht is tax implement as per income tax.
07 September 2010
In my opinion the liability(Accounts Payable/Sundry Creditor) will be written back and reflected as other income in P&L without affecting the Fixed Assets which was already accounted when the FA was purchased.
1)FA Dr 4.5 To Sundry Creditors 4.5
2)Sundry Cr Dr 4.5 To Other Income 4.5 This amount becomes taxable,however the depreciation on FA is allowable deduction in computing taxable income.
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