Set off of debtor and creditor

Articleship 731 views 1 replies

While working on accounts finalisation I found that our client company has both purchase and sale transactions in a number of instances with the same party. Therefore the same party is both Debtor and Creditor for the Company. In all the cases, both the parties ie. our client company and the external third party are maintaining two separate ledgers namely 1. Debtors Ledger and 2. Creditors Ledger. However for the year, my client company is not passing a set-off entry between the Debtors and Creditors ledger and keeping both the ledger balances as it is. My question is what is the point in maintaining 2 separate ledger balances with the same party as this ultimately will be adding weight to the Balance Sheet and make it unnecessarily heavy.

Replies (1)

Yes it would make books a li'l hefty but this practice will show the exact figures of debtors and creditors because debtors represent the outstanding amount towards sale and creditors shows outstanding payment of purchases.

However u may recommend them to set off these balances with each other, which is also not wrong.


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register