How to present funds held by solicitor in account.

Didn't find your answer?

Company need to compensate Orang Asli due to development of land. The compensation is estimate to be RM1mil but have not finalized yet because still in negotiation.

At the same time, director has paid the estimated amount of RM1mil on behalf of company to solicitor to hold this money.

What is the double entry for the whole situation? Is it correct 

Dr Compensation exp  Rm1mil

      Cr provision for orang asli compensation.     Rm 1mil

Dr Advancement to solicitor RM 1mil

      Cr amount due to director.  RM 1mil

Replies (9)

Please login or register to join the discussion.

DougScott
By Dougscott
04th May 2024 07:37

Yes

Thanks (0)
By johngroganjga
04th May 2024 08:01

Your second entry is right, to recognise the sum advanced by the director to the solicitors on behalf of the company.

Your first entry is only right if and when it is correct to recognise the compensation payment as an expense.

Thanks (1)
Replying to johngroganjga:
DougScott
By Dougscott
04th May 2024 19:58

Surely its okay in the accounts as "Compensation expected" but you would add it back in the Corporation Tax comps?

Thanks (0)
Replying to Dougscott:
By johngroganjga
04th May 2024 20:06

Well if you added it back in the CT computations that would be an admission that it shouldn’t have been recognised in the first place!

Thanks (0)
Replying to johngroganjga:
DougScott
By Dougscott
05th May 2024 08:19

Isn't that what you would do with a "bad debt provision" as opposed to a "bad debt"?

Thanks (0)
Replying to Dougscott:
By johngroganjga
05th May 2024 15:48

You add back a general bad debt provision, but not a specific one.

Thanks (1)
Replying to johngroganjga:
avatar
By David Ex
05th May 2024 17:25

johngroganjga wrote:

You add back a general bad debt provision, but not a specific one.

I believe the OP is using Malaysian ringgits (RM) as currency so we maybe need to provide tax advice based on Malaysian law.

Thanks (0)
Replying to David Ex:
By johngroganjga
05th May 2024 18:03

I am not providing tax advice to the OP, who didn’t ask for any anyway. I am responding to Dougscott’s points about how certain matters should be dealt with in CT computations.

Thanks (0)
Replying to johngroganjga:
avatar
By David Ex
05th May 2024 18:10

johngroganjga wrote:

I am not providing tax advice to the OP, who didn’t ask for any anyway. I am responding to Dougscott’s points about how certain matters should be dealt with in CT computations.

Irony: the expression of one's meaning by using language that normally signifies the opposite, typically for humorous or emphatic effect.

Thanks (0)