DPT bank had an NPA account of M/s Sahil and Sons showing recoverable amount of 40 lakh in the books. It sold the NPA for 45 lakh. Please select as…

CA Final · Advanced Auditing, Assurance and Professional Ethics · MTP · September 2025
DPT bank had an NPA account of M/s Sahil and Sons showing recoverable amount of 40 lakh in the books. It sold the NPA for 45 lakh. Please select as to which of the following options is the correct accounting:
(A) Let the amount remain in M/s Sahil and Sons account.
(B) Credit the excess of 5 lakh to profit on sale of assets.
(C) Credit the excess of 5 lakh to provision for loss on sale of NPAs.
(D) Return 5 lakh to the party purchasing the NPA.

Suggested Answer and Working Notes:

Correct Answer: Option (C)

Credit the excess of 5 lakh to provision for loss on sale of NPAs.

Topics: Special Features of Audit of Banks & Non-Banking Financial Companies

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