Effect of write off as bad debt
Chandan Garg
(Querist) 03 January 2012
This query is : Resolved
LC opened in a bank against purchase of material from USA. Documents sent by party from USA and Money gone but material not received .
Company has sent notice to BANK as there were some discripencies in the documents , bank denied and case filed in national commission and the process is going on………. Also one recovery suit against bank started in addition to consumer.
In the mean time the company has written off the amount in its account as bad debt.
Question is :
What is the impact of written off of amount. As the company has not used its all resources for recovery and company has not failed to recover .
Can it impact the matter advversaly.
A V Vishal
(Expert) 03 January 2012
The impact is while the taxman assesses your file he will ask for details and basis of writing off the amount as a bad debt. In case the amount is recovered it will reflect in the books under other income or appropriate head like purchases will be debited if the materials are received.
Raj Kumar Makkad
(Expert) 03 January 2012
The company has done a wrong accounting. It should have shown the amount under recovery as Suspense Amount instead of writing it off when the proceeding of recovery is under litigation.
prabhakar singh
(Expert) 04 January 2012
Accounting option chosen is wrong.It should have been put in suspense a/c,or should have been shown as debit upon the bank;it may go against co.in pending cases,in case a/c are before court.
