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Excess provision


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Querist : Anonymous

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Querist : Anonymous (Querist)
Hi Experts

Electricity Provision was made amounting to Rs. 35000/- as on 31.03.2015 in the books of PARTNERSHIP FIRm

Actually bill was received for Rs. 26000/-

Now excess provision is reversed for Rs. 9000/- by crediting P& L account

But our CA is in the opinion that it should be treated as Misc. Income.

Please explain.


Dear Anonymous, When you provided for Rs 35000/- you claimed expense of the same in last year. hence excess provision is excess expense claimed therefore it should be offered to income. CA has suggested rightly.

but is it ok to show it as misc income??? in my opinion it should have been reversed as last year p&l account was debited excess pls suggest

What you're saying is also correct. but I'd suggest to treat it as income in current year. the reason is because the concept of provision itself is that you cannot estimate expense and hence it is provided for. if provision is excess then you reverse it in the year of actual payment.

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Querist : Anonymous

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Querist : Anonymous (Querist)
Need more clarifications on this as i am very confused about this...different opinions are there.

Please help experts



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