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Advance paid to creditors

Pramod Kumar B.K. (CA Articleship student) (36 Points)

31 May 2011

Dear CAclubindia users,

Please solve the following query

How to treat advance paid to creditors and advance received from debtors ?

In the following conditions:

1) In accounts i.e. (how to show in balance sheet)

2) In case of calculating 'Drawing Power' when banks providing Cash credit or Over draft facility or renewal of the same.

Thanking you in advance.

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13 Replies

Rajnikant Vadigoppula (CA, CS And CMA Final) (919 Points)
Replied 31 May 2011

1. in accounts it will be shown as trade advances

2.in case of drawing power advance from Debtors should be deducted from other debtors and Advance from creditors should be deducted from other creditors

1 Like

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CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 31 May 2011

ADVANCE TO CREDITORS UNDER LOAN AND ADVANCES

AND ADVANCE FROM DEBTOR UNDER HEAD ADVANCE AGAINST SUPPLY

1 Like

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 31 May 2011

advance from debtors - its part of liability side - head "advance from customers"

advance to creditors - its part of asset side - head " loans and advances"

for bank's drawing power, advance from debtors are liabilities, and advance to creditors are assets.

1 Like

CA Rakesh Garg (Asst. MGR Taxation) (510 Points)
Replied 01 June 2011

Originally posted by : U S Sharma
	advance from debtors - its part of liability side - head "advance from customers" advance to creditors - its part of asset side - head " loans and advances" for bank's drawing power, advance from debtors are liabilities, and advance to creditors are assets.

2 Like

Pradeep Kumar (Article, CA Final) (227 Points)
Replied 01 June 2011

Originally posted by : U S Sharma
	advance from debtors - its part of liability side - head "advance from customers" advance to creditors - its part of asset side - head " loans and advances" for bank's drawing power, advance from debtors are liabilities, and advance to creditors are assets.

1 Like

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Kumar Babu.G (Chartered Accountant) (1597 Points)
Replied 01 June 2011

I agree with Mr.Pramod Kumar

1 Like

Ravindra kumar (student) (87 Points)
Replied 01 June 2011

(1) Advance from debtors - it is the part of liability side of balance sheet -under head "
Advance from customers"

Advance to creditors - it is th part of asset side of balance sheet - under head "Loans and advances"

1 Like

Pramod Kumar B.K. (CA Articleship student) (36 Points)
Replied 03 June 2011

Originally posted by : Pramod Kumar B.K.
	Dear CAclubindia users, Please solve the following query How to treat advance paid to creditors and advance received from debtors ? In the following conditions: 1) In accounts i.e. (how to show in balance sheet) 2) In case of calculating 'Drawing Power' when banks providing Cash credit or Over draft facility or renewal of the same. Thanking you in advance.

Thanks to one and all for solving my previous query.

Here I have another query which is continuation of my previous question No. 2^nd.

Which of the following will have better presentation while calculating DP?

Whether advance paid to creditors should be deducted from total 'Creditors' of a company

Should be added to total debtors

Since while calculating DP there are only chances of Stock, debtors, Creditors, whatever we adjust, it should be adjusted within above said.

And

Also for ‘advance received form ‘debtors’

Thanks in Advance !!

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 03 June 2011

while calculating DP, Debtors less than 90 days are taken in accounts, and creditors balance is negative effect on DP.

as dedcucting the advance from suppliers from debtors does not make any change in creditablity . so the presentation should be in proper way, for all departments, not only for bank credit limits.

CA Hitesh Jain (Partner) (39 Points)
Replied 28 March 2016

Dear Sir

In DP Calculation, in a case, the Debtors are becoming negative after adjusting advance. Where as the Company has considered the value as ZERO (but not negative). In my view, its wrong. Let me know your views.