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Fixed Assets

h.balaji (studying) (58 Points)

04 October 2007

There are two companies A and B. A sold machinery to B.B did not pay d amount and in
the books of A it s written off as Bad Debts.B s still using d asset.How wil tis be
treated in B's Books. wil it be a income for him.wat should i do to d depreciation which was provided earlier.Please explain in detail

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6 Replies

Ramanathan (Article Assistant) (135 Points)
Replied 05 October 2007

B has to treat the amount payable as creditors written back. Aggregate of depreciation written off in the books have to be treated as income

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Ramanathan (Article Assistant) (135 Points)
Replied 05 October 2007

Generally people dont write back such creditors in case there is going to be an amalgamation of a situation when the company is obliged to show the networth to the maximum possible extent these kinds of credits are witten off

Ramanathan (Article Assistant) (135 Points)
Replied 05 October 2007

Ravikumar.G (Consultant) (18525 Points)
Replied 05 October 2007

If it is come under purview of Excise duty, they have to compulsarily raise invoice and then they can calim the excise credit. It should not be treated as gift.

Dinessh Kumar (Articled Asst.,) (193 Points)
Replied 05 October 2007

Simply, write off the balance to be paid to A as Creditors no longer payable and claim depreciation asusual.

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Srivathsan Rangarajan (Chartered Accountant) (66 Points)
Replied 10 October 2007

First thing this is not so unusual in present day scenario. The primary lookout in such circumstance would be the stated purpose of the transfer in the first instance. If it were a genuine sale there is no reason why the liability should be written back. Where there is no stated purpose of the transfer and the then recorded facts and circumstances do not prevent an inference that the transaction is in nature of gift. Then no liability should be booked in the accounts instead the gift be valued at the fair value and recorded in the books debit to the asset and credit to the revenue.