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Bill booking

This query is : Resolved 

Can a company book expenses in current yar against bill which relates to previous yr and also dated to previous year but not booked in that year?

That can be booked but if not provided in previous year then it will be wrong accounting practice.
It is known as Prior period Item.

Yes you can booked it in current year if provision is not made. Just you have to show the same in 3CD as previous year expenses

Thanks Dashrath & Kirti, but can u plz guide that how provisions can be made for such expenses bills against which have not been recd till yr end? How the TDS impact be calculated? What entry be made on actual receipt of bill?

As u say the expenses to be booked, means that no provision was made prvious year. In such case the expenses booked in the current year will be grouped under prior period items.

Will this cause any difficulty to show expenses under prior period item?

Yeah, you will have a qualified audit report and the AO may ask about these, specifically.
you have to show it in a separate field for this in IT audit report (Form 3 CD).

Thanks Dashrath, can u suggest plz that what will be the best option to book these expenses?

Treat these as Prior period Items, only if the amount is materil.

What if amt is not material?

Treat it as a normal bill.

Prior period items are generally infrequent in nature and can be
distinguished from changes in accounting estimates. Accounting estimates
by their nature are approximations that may need revision as additional
information becomes known. For example, income or expense recognised
on the outcome of a contingency which previously could not be estimated
reliably does not constitute a prior period item.
Prior period items are normally included in the determination of net
profit or loss for the current period. An alternative approach is to show such
items in the statement of profit and loss after determination of current net
profit or loss. In either case, the objective is to indicate the effect of such
items on the current profit or loss.
As per section 145 and accounting standard II of IT act: Prior period items shall be separately disclosed in the profit and loss account in the previous year together with their nature and amount in a manner so that their impact on profit or loss in the previous year can be perceived.
and Any change in an accounting policy which has a material effect shall be disclosed. The impact of, and the adjustments resulting from such change, if material, shall be shown in the financial statements of the period in which such change is made to reflect the effect of such change. Where the effect of such change is not ascertainable, wholly or in part, the fact shall be indicated. If a change is made in the accounting policies which has no material effect on the financial statements for the previous year but which is reasonably expected to have a material effect in years subsequent to the previous years, the fact of such change shall be appropriately disclosed in the previous year in which the change is adopted.

Thanks a Lot.


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