Post project expenses

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This query is : Resolved

abhilasha jain (Querist)

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)

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)

02 September 2013 Thanks,

What will be the necessary entry for it.

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)

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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