Please see my problem it's really best.

Dear sir madam,

               I explain my problem through example for batter explanation.

               I want to know accounting as well as taxation effect on following problem.  

               Suppose, I am accountant of two party one party manufacture product (party-A)which is used by my second party (party-B) as a machinery (fixed asset).  

               Party-A sold machinery to party-B on 6 month credit basis.This transaction done on date 1-4-2011. on balance sheet date party-B not pay any amount. Party-A write off debtor as a bad debts and outstanding installment dr. to profit and loss a/c.

               Party-B write off depreciation on machinery in following year. Can i do this transaction?

               If your ans. is yes than what account treatment can i do in following problem.

               IF after 7 year machinery amount write off as a depreciation but in creditor side my balance show how write off this amount?