Provision for expenses

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Querist : Anonymous

Querist : Anonymous (Querist)

14 July 2010 Provision for salary payable made in 2008-09 Rs. 1,00,000/- .
Rs. 75,000/- paid in 2009-10.
Now company wants to reverse Rs. 25,000/- in salary & wages Account .

Nw the question arises that whether this Rs.25,000/- should be reversed in Salary & wages account or should be treated as Prior period income .
We can say that Rs.25,000/- was excess provision made.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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14 July 2010 It should be treated as excess provison made as prior peiod items

Querist : Anonymous

Querist : Anonymous (Querist)

14 July 2010 But there is no error or omission, so that we can treat it as prior period income.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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14 July 2010 But it is Incorrect estimation

Querist : Anonymous

Querist : Anonymous (Querist)

14 July 2010 it means it will be treated as prior period income.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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14 July 2010 yes

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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14 July 2010 Incorrect estimation is not treated as prior period item. it is change in estimation thatswhy show in P&L a/c of current year.

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CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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14 July 2010 it will not be treated as prior period income.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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14 July 2010 But Ravi the expenses not related to the current year,then

Querist : Anonymous

Querist : Anonymous (Querist)

14 July 2010 ????????????

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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14 July 2010 I partly agree with Mr.Ravi. It is not a Prior period income, but as per AS-5 Changes in Accounting estimation and effect in financials in 2 different period need to be disclosed

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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14 July 2010 disclosed in notes of accounts.

CA Ravi Sisodia

CA Ravi Sisodia (Expert)
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14 July 2010 as per AS-5 Changes in Accounting estimation and effect in financials in 2 different period need to be disclosed in notes of accounts and its effects to P&L a/c should be disclosed..

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