Write-off of accounts payable

Accounts payable is the total amount of debts that a business entity is obligated to pay to other entities. This financial category is regulated by the National Accounting Regulation, which defines the methodological principles of the formation and display of data on accounts payable in accounting and financial reporting.

They can be classified by maturity into:

1. Long-term;
2. Сurrent.

The main types of current payables:

1. Commercial debts
2. Financial loans
3. Securities obligations
4. Salary arrears
5. Tax obligations

Options for settlement of accounts payable

Early cancellation of debt obligations

Provides for the closing of accounts payable before the deadline established by law for filing a lawsuit.

Write-off of overdue financial obligations

This applies to situations when the company initiates the debt write-off procedure after the expiration of the legally defined term for filing a claim by the creditor.

Prerequisites for early cancellation of payables

Premature write-off of accounts payable requires valid legal grounds:

• Creditor’s voluntary refusal of debt claims

It provides for the documentation of the creditor’s expression of will regarding debt forgiveness. This is usually implemented by concluding an additional agreement or drawing up a special addendum to the main agreement.

• Termination of the existence of the creditor-individual

In the event of the death of the creditor, who is a natural person, the debtor company must obtain an official copy of the death certificate, which will serve as a legal basis for initiating the debt write-off procedure.

• Termination of activity of the creditor legal entity

The basis for writing off the debt will be a corresponding entry in the UDR. This record officially certifies the liquidation of the legal entity and, accordingly, the termination of its rights as a creditor.

Cautionary aspects when writing off accounts payable

When considering the issue of early cancellation of payables, it is important to consider the following key points:

• Hereditary risks

In the event of the death of a creditor-individual, there is a six-month period during which heirs may appear. They will have the right to demand repayment of the debt, which can complicate the write-off process or lead to its appeal.

• Succession of legal entities

When the activity of a creditor legal entity is terminated, it is worth checking whether reorganization has taken place instead of liquidation. In case of reorganization, it is possible to have a legal successor to whom the rights of claims under debt obligations will be transferred.

• Tax consequences

There is a possibility that the legality of the write-off will be challenged by the regulatory authorities, which may result in additional taxes and penalties.

• Impact on business reputation

Premature write-off of debt can negatively affect the company’s reputation, which should be taken into account when making a decision.

Complex matters require legal assistance

It is important to seek qualified legal assistance in complex issues of writing off payables and other financial obligations.

The company “Prykhodko and partners” has many years of experience in providing legal services in the field of financial law. The company’s specialists will help not only in determining the legal grounds for writing off debts, but also in the correct preparation of the necessary documentation. This will ensure the legal purity of transactions and minimize the risks of possible disputes. Contacting professionals will avoid mistakes and ensure proper protection of interests.