NEGATIVE LIABILITY: BY ER. AVINASH KULKARNI

Saturday Brain Storming Thought (185) 19/08/2023

NEGATIVE LIABILITY

Technically, a negative liability is a company asset, and so should be classified as a prepaid expense

Most negative liabilities are created in error, so their presence indicates problems with the underlying accounting system

Negative liability means in case of any negative entry in the present quarter that shall be carried forward to the next quarter

Negative liability under GST

If the cash ledger balance goes negative, the taxpayer must deposit the money using a challan for that amount

The taxpayer may request a refund of the excess amount if the payment of the amount that has been credited to negative liability has been made through DRC-03, DRC-08 or GST-4 of the following financial year

Example of negative liability

If you were to accidentally pay a suppliers invoice twice, the first payment would reduce the original liability recorded in accounts payable to zero, while the second payment would have no offering liability, resulting in a negative liability on the balance sheet

Negative total current liability

If the liability account is negative, there are two situations

We overpaid the loan

We paid much more than the loan amount

There is no opening balance, all loan payments were recorded as debit, and make the balance negative

Negative Balance

A negative credit card balance is when your balance is below zero

It appears as a negative amount balance

Negative liability ledger

A negative liability statement is a report that can be found on the GST login website and contains a negative summary for the present quarter in Form CMP-08, which will be adjusted th the next quarters liability

Negative capital

Negative working capital is when a business’s current liabilities exceed its current income and assets

A temporary negative working capital typically occurs when a business makes a large purchase, such as investing in more stock, new products or equipment

Negative balance in insurance

Negative balance in insurance are created, when that a claim has been overpaid and retracts/re-adjudicates that previously paid claim

Can asset be negative

No, fixed assets cannot be negative

There are accounts that track the reduction and value from wear and tear that fixed asset incur over their life and these negative assets are called Contra Assets and are tracked as accumulated depreciation

Negative debt in balance sheet

A negative net debt means a company has little debt and more cash, while a company with a positive net debt means it has more debt on its balance sheet than liquid assets

Negative Asset

A Contra Asset is a negative asset that offsets the asset account with which it is paired

The purpose of Contra asset account is to store a reserve that reduces the balance in the paired account

Guide to checking the negative liability statement

The taxpayer can have access to the negative liability statement by logging into GST website

1) the taxpayer should access the GST website, click on the option Services and choose the Ledgers option

2) then he needs to navigate to the Negative Liability Statement option to check the negative liability statement

Process for nullifying Negative Liability Statement

In order to invalidate a negative liability adjustment, as the initial step, the taxpayer should raise a ticket on the grievance website or write to the jurisdictional GST officer as soon as he notices this issue