Bankruptcy and Customer Deposit

by Zmrahi
(Calgary, Alberta, Canada)

A private company received an amount on deposit as an advance against their contracting work, but during the contract work, the other company went bankrupt.

In this case, how will the advanced money on deposit be treated on the financial statements? What about the GST, if applicable?

image of fancy scroll lines

Hello Zmrahi,

Assuming that the work completed prior to the bankruptcy exceeds the advance deposit, I would create an invoice for the work completed and/or amounts due. Any GST applicable should be billed correctly on the invoice.

Once that is done, I would apply the advance as partial payment of the invoice and write-off the remainder of the invoiced amount owing to bad debts.

Click here to post comments

Return to Small Business Bookkeeping.

Enjoy A Tea Break With
Me Today. Let's Chat!

Use the search feature to quickly find the
information you're looking for.

 Keep Your  eDocuments Safe And Secure… $7 USD
Version 2 now out
Bigger and Better

Your Learning Curve!


Warm up your tea cup and check out these chats ...

Click on image above to read the chat.

Purchasing These Products Through My Links Helps To Support This Site

Click on image above for my review.

Join Me On Facebook

Help support this site by "liking" me! Here's where I post current information.

Listed Under Websites NOT Local Business.
This website is not associated with the business operating in Bonnyville AB.

A Handy Reference