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Provision entry of electricity bill etc


Dear All

I need your valuable help

I want to khow about provision entries in a/c on 31.03.11

any criteria for provision entry of electricity billing date or bill issue date

the same thing in telephone bills also as above

for example as below

1.) electricity bill date 26.03.11 bill paid on 08.04.11

2.)  landline bill date 06.04.11 billing period 05.03.11 to 04.04.11 bill paid on 29.04.11

can i pass provision entry of electricity bill payable & telephone bill payable on 31.03.11 ????

 

thank in advance

arshad

 
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ALWAYS READY TO LEARN NEW THINGS

yes you can pass electricity and telephone bills payable ac. on 31-03-2011


Total thanks : 1 times

 
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Thanks for reply Dear Radhekrishna ji

i want to khow the criteria of provision entries in a/c, means with type of expenditure, and amount criteria also

thanks

arshad

 
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Chartered Accountant


There is no criteria as such in Provision entries. Actually the expenses pertaining to the previous year which are paid in the next year need a provision in the books. If no provision is made, then the expense will be disallowed in the year in which the payment is made (disallowed under Prior Period Exps.). Provisions are must, when the Assessee follows mercantile system of accounting.


Regards,

Devendra


Total thanks : 1 times

 
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Thanks Devendra ji for answer

Arshad

 
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ALWAYS READY TO LEARN NEW THINGS

no criteria you can also create it as estimated by you according to previous year bills

 
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THANKS RADHEKRISHNA FOR ANSWER

ARSHAD

 
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If u follow mercantile system of accounting u need to make a provision for such exp in the year to whichits related,in such a case entry will be Deited to relevant exp A/c, and Credited to expenses Payable A/c.

But if u follow the cash basis of accountind such exp will be allowed in the year in which it is paid.

 
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can  you kindly explain the entry,,,


on 31 mar 2011 i made entry

telephone expenses ac dr ---   1500rs

provision for telephone expenses ac cr --- 1500 rs

 

and on 10 april i recd the telephone bills worth 1200/- kindly explain what the entry should be?

 

should i modify the journal entry made on 31-3-11 to Rs.1200 Rs. or shall i create a provision only after i receive the actual expenses, because i dont think so there will be any company who closes accounts on exact 31 mar, guess many companies make backdated entries, and is it good to make backdated entries, many times i make lot of backdated entries, so only after receiving tel bill can i make the amount of rs.1200 as provision?

 
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we should

 

Electricity expenses a/c dr

   To Provision for electricity cr

 

 

 

and at the end of month

 

Provision for electricity a/c dr

      to Bank a/.c

 
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