Post project expenses

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abhilasha jain (Querist)
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02 September 2013 If a Project is completed this year and there is a provision in a contract that if in coming 1 year if any deficiency arise then contractor has to do that work on his own expense.

whether the contractor can make a provision for those expenses in current year.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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02 September 2013 Yes such anticipated exp that may be incurred next year should be provided in books of a/c as per as-7.
Next year if the exp do not materialise then the provision made should be reversed.

abhilasha jain

abhilasha jain (Querist)
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02 September 2013 Thanks,

What will be the necessary entry for it.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
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02 September 2013 Expense (name of relevant exp)a/c ..dr
To Expense payable a/c

Exp a/c shall be closed in current year and transfered to Profit and loss a/c

Exp payable a/c will be transfered to Bal sheet under current liabilities.

if next year there is exp incurred then
exp payable a/c...dr
to Cash/ bank a/c

If no actual exp incurred then reverse the 1st entry above.

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