Please see my problem it's really best.

Others 374 views 4 replies

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?

 

Replies (4)

If Party-B doesn't write off the machinery and if he is filing his income tax return then he has to show the amount of bad debt as his income.

And if he write off the machinery then accounting entry would be Party-A Dr. to Machinery Cr., and if he has claimed depriciation on that that will also be added to his income

Dear friend party-B can't write off amount as a bad dabts because it's not his debtor but it's a creditor.

I'm not Saying that Party-B should write off.

I said that If Party-A shows as bad debts then Party-B has to include that amount of bad debt to his income while filing his return.

 

U R RIGHT.

BUT DEAR,  I draw this tranction for reducing my net protit purpose.

if i increase my profit than i have any taxation benifit.

i want to reduct profit in both party.

u give me more info. if possible.

 


CCI Pro

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