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Journal entry

Navneet (Accountant) (44 Points)

19 May 2015

Can somebody please tell that what will be the accounting entry from auditor's point of view, If a company receive a bill of Rs. 12000 for AMC of Software for the period from 01.08.2014 to 01.08.2015. bill dated 01.05.2015, what will be entry pass in 01.05.2015 in tally

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CMA Poornima Madhava (CMA) (13097 Points)
Replied 19 May 2015

If books r not closed:

1. Make provision for whole amount on 1/8/14 and treat the charges from 1/4/15 to 1/8/15 as prepaid exps which can be expensed in 15-16 (even though bill is received in subsequent year, yet services were availed during last year itself and bill can be kept as evidence in support of provision) OR

2. Consider charges from 1/8/14 to 31/3/15 as provision for AMC in 14-15 and account the remaining in next year on the date of bill

If books r closed:

1. Treat the charges from 1/8/14 to 31/3/15 as prior period exps and account the charges for remaining period on the date of invoice.

Hope i have not missed anything.