Bhavani Shankar (Employed) (135 Points)
26 June 2012A person has paid amount of rs 10000 thru cheque to a party in yr 10-11.But till the end of that yr party did not deposit the cheque and informed the person that he does not want the amount. What is the correct accounting treatment the person must do in his books if he had already debited in his books the bank account... Can he show that 10000 as income in p& l of current yr...
Thanks in advance
divva
(Industrial Trainee @ Ashok Leyland)
(348 Points)
Replied 26 June 2012
It vil be reversal entry, Since its stale cheque, It cannot be brought in as income in the CY.
sandhya
(nil)
(58 Points)
Replied 26 June 2012
Pass a reverse enrty to subsequent heads in current date
Nitil Kr. Agarwala
(Persuing CS)
(264 Points)
Replied 26 June 2012
agreed with the above..
Jus pass the simple reversal entry..
Vikash Kumar
(Manager Accounts (CA. Final))
(694 Points)
Replied 26 June 2012
Entry No-1 : Reverse Entry.
Entry No-2 : Amount not payable w/o as income.
KRISHNAPRASAD IYER
(B.Com , CA Final)
(657 Points)
Replied 26 June 2012
ya...just pass the reverse entry
ravitheja
(CA Final)
(77 Points)
Replied 26 June 2012
passing of reversal entry is not correct accounting treatment
you have to offer it as income in the current year as you have claimed expenditure in the previous year.
if u just reverse the entry to the respective expenditure head then the expenditure of current year will not be reflected true and fair and
which will be added back to income when the respective ledger will be scrutinized under income tax act.
KORGAONKAR ASSOCIATIES
(pratice)
(118 Points)
Replied 26 June 2012
if expenses head is quite big amt than you must reverse if not a big amount and not in current year than show as income
vijay...............dc
Sanjeet
(Sr. Executive F&A)
(114 Points)
Replied 26 June 2012
In my view
first the entry should be reversed to the respective head. so every person can understand that the cheque is not cleared.
after that account head balance is reduced by the same amount and this amount should transfer to the income of the current year (if claimed as expense in earlier year) or otherwise capital account. So that the true and fair picture of account can be acertained.
If i am wrong please let me knw.......
Akshay
(article)
(25 Points)
Replied 26 June 2012
to some extent sanjeet is right .
we will reverse the entry...
as the person only have debited to party a/c IN BANK and not treated as expenditure for previous year..
Prakash
(B.Com CA final & CS final)
(196 Points)
Replied 26 June 2012
hi
a) if the amounts are in dispute then you have to keep the party balance until the expiry of the limitation period - if so just pass a reversal entry.
b) if the party is discharging you from the liability completely then #1 pass a reversal entry & #2 credit the creditors written off a/c (income) - if the expense was allowed for income tax purpose in the earlier years, this year the same will be taxed u/s.41 of Income Tax Act. It has to be disclosed in form no.3CD also.
samrat
(md)
(21 Points)
Replied 26 June 2012
HI all.
Every entry has 2 effect.
In this case 1st efect is: Party a/c is credited and 2nd effect Bank a/c is debited. But if cheque is not passed then the entry can be reversed or canceled.
If cheque doesnt pass then it will be treated as wrong entry. As 2nd effect is not there.
Hemanshu Rohitkumar Bakshi
(Credit Controller)
(197 Points)
Replied 26 June 2012
We should reverse the existing entry so that we can minimize the exp.to that extent in the current year which we have debited in the previous year.
CAclubindia
