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General Accounting Discussions: Inter Company Outstanding

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    • CommentAuthortgm603
    • CommentTimeSep 8th 2009
     
    ABC = a proprietorship
    XYZ = a private limited company

    ABC already ceased business officially in July , 2008
    XYZ is still active

    In ABC book of accounts :
    -- XYZ is a Trade Debtor with DEBIT balance of $20,500.00
    -- XYZ is also a Sundry Creditor of ABC with a CREDIT balance of $22,800

    Since ABC is closing down business officially in July, 2008 . The following double entry was taken up to clear off outstanding with XYZ ( in ABC book of accounts ):

    DR Sundry Creditor-XYZ at $20,500
    CR Trade Debtor-XYZ at $20,500
    ( As contra of Sales Invoice )

    PLEASE help me what is the double entry I should do in XYZ book of account for the above transaction ?

    MANY MANY THANKS for helping me .
    • CommentAuthorzaqperez
    • CommentTimeSep 9th 2009
     
    This is a more efficient approach:

    DR - Accounts Payable:ABC $20,500
    DR - Bad Debt Expense $2,300
    CR - Accounts Receivable:ABC $22,800

    To close accounts for ABC Co. and record the resulting loss.

    However, this may be a more accurate assesment:

    DR - Accounts Payable:ABC $20,500
    DR - Bad Debt Expense $22,800
    CR - Non-sales Revenue $20,500
    CR - Accounts Receivable $22,800

    To close accounts for ABC Co. and record the resulting loss.

    Either approach will result in the same bottom line but proper documentation will help prevent any problems resulting from an analysis of the income statement.

    Hope this helps!
    Thankful People: tgm603
    • CommentAuthortgm603
    • CommentTimeSep 13th 2009 edited
     
    zaqparez,

    Thanks for your reply. You've been very helpful.

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