Bills in our company are booked very late for eg if the bill is of April the same might b booked during September/October, now this basically happens bcoz the bills are checked by the merchandisers and then passed on to accounts, many a times there are heavy debit notes passed by us so unless and until it is checked we do not pass any entries in books, is this method feasible or we should opt some other method of accounting. If we book bills as and when we receive on provisional or some other basis then it will affect the profit and simultaneously the calculation of Advance Tax will get affected. bcoz the bills take a long period to get cleared by the merchandisers. What are the positive and negative aspects of booking the bills before they are checked. Please let me know
There should be a proper planning for the procedural aspect of checking the bills.
1) As rightly shared by you it effects advance tax adversly, as if the bills are not booked timely in that case you have to pay more advance tax at earlier installments. However same will get compensated in later installment but we should not forget the time value of money. We can invest the excess advance tax paid & earn some interest.
2)If company is sending monthly/quarterly MIS then there is a cause of worry as the profit will vary from one month/quarter to another for reach reasons has to be given.
3) If you book late, then there may be cases of prior period expenses which will get disallowed under income tax act & will be taxable.
4)One can book expenses on estimated basis for the time being every month & once it gets checked & if there is any difference same can be reversed later on via credit notes.
It is suggested that bills should be booked only timely basis.
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