I am managing director of a company in SA.
Basically there are unauthorised creditor invoices that have been entered in to our internal accounting system.
We are not being actively pursued for the money, there is no written legal warnings and the claimed debt may be over a year old in some cases. Is it legal to process a credit in our internal accounting system so risk of inadvertent payment is averted and aged creditor is not exaggerated; without written approval from the Creditor ?
It seems appropriate and correct that you update your creditors ledger to correctly reflect that only amounts that are true liabilities are included.
If the amounts are not legitimately owed there are some potential negative outcomes by not deleting them.
If you are paying tax under the accruals method of returning income you may have incorrectly claimed a tax deduction and in addition incorrectly claimed GST input credits. In addition any user of your financial statements (eg banks) will see your financial position as worse than it actually is.
Hope this helps.
Appreciate the response
Fully agree. Leaving amounts in the system you know you dont acknowledge liability and are certain of the soundness of your stance should it be challenged....just exposes the company to risk through inadvertent payment processing which is easy to happen with online transfers etc. And again exaggerated Creditor reports dont help with bank relationships. As a manager I just want them out of our internal system immediately and reverse or pay the GST claimed . My accounts dept are insisting on formal credits from suppliers before that occurs. This leaves me exposed to risk of unauthorised payments, and in todays fast paced world want the system to reflect what we acknowledge only. Sure issues can be reversed and positions reviewed should it be challenged. Is there some CPA liability or legal responsibility or ASIC requirement that limits us simply having our known creditor position stated in our system as we fully believe....right now!!!.