Accounting Treatment

Write off Payables

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Seniors I Need your help regarding the matter
Case is We received the Inventory and Payable is standing which is Dr Inventory and Cr Payable
Now We writed off the Payables and we still have that inventory so I want to ask what should be the accouting treatment
Dr Payable and Cr (Other Income or Equity) ?? 
I want to ask what should be credited as we Have inventory and which remain with us and as we write off that paybles what should be Credited (Other income or Equity)
We our revenue is generated from selling Used Tyres. So tyres are our inventory
Kindly Reply because Tax will charged 
What should be credited?

Sorry for my bad english

Replies (3)

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By stepurhan
22nd Mar 2023 08:41

Why are you writing off payables for inventory you have received? Without knowing how you are justifying cancelling what, on the face of it, seems to be a legitimate debt you're not going to get an answer.

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By tom123
22nd Mar 2023 08:59

I agree with stepurhan that the whole premise seems odd.

It is probably in your gift to write off "Receivables", but if I was your supplier looking for payment you wouldn't get the option to say "Oh, we don't have to pay that, we have written it off"

However - if we assume this write off is with your suppliers agreement, then the transaction would be to raise a supplier credit note - (which in double entry terms is a debit transaction) and post the credit side of that to your inventory account.

Stock must be valued at the lower of cost and realisable value.
Your stock has now cost you nothing - so you cannot give it a value.
And, yes, if you manage to sell those free tyres your profits will be higher with nothing to deduct - because they cost you nothing

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By Truthsayer
22nd Mar 2023 10:45

Why not ask your accountant?

Thanks (2)