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Commission on Bank Guarantee


A company had taken a Guarantee from bank and Guarantee period, say From 01.10.2010 to 30.09.2011 and paid the entire Commission in the beginning itself ... Does it need to account Prepaid ( on the unexpired Portion) for the Commission???

 
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Chartered Accountant


Dear Mr. Santhosh,

Wen the company pays bank, guarantee commission and if it is of revenue nature(not capital), expense should be segregated as current year expenditure and prepaid expenditure when such expenditure covers more than the relevant financial year ending period.

 
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glidor@gmail.com


bank commission against guarantee provided, is one time incidental charge and is not related to period or validity of guarantee, for the period of guarantee, bank has obtained term deposits or margin money.

so such bank commission should be debited as bank charges directly and accounted on payment basis only.  

 
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