Renjith S Nair (Accountant) (94 Points)
25 May 2015Hello dears,
Thank you all for your valued time.
How to account during the current year for the below situation.Kindly please find me Journal entries too. (how to account such huge liability in current year)
Situation; 1.Lease rent not paid or accounted last ten years, sum of Rs. 3,000,000
Situation; 2. we owed to government and they send a notice, thus we came to know this liability.
Thank you
Yusuf Khamgaonwala
(CA in practice)
(72 Points)
Replied 25 May 2015
According to me for first situation relates to prior period and thus will be accounted as per AS-5
For Sit.1
Lease Rent A/c Dr.
To Prov. for Lease rent
the amount will be shown in P&L as prior period item
For Situation 2 is the liability crystalise or in dispute (since you have received notice) if its crystalise, account it as prior period or if it is in dispute show it as contingent liability
Sriram
(CMA Final)
(178 Points)
Replied 25 May 2015
As said by Mr. Yusuf. if it is crystalized, then pass entry and show it under prior period item in P&L.
if there is any dispute show it as contingent liability under the B/S
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