Provision for expenses

Save Share

This query is : Resolved

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)

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)

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)

14 July 2010 yes

CA Ravi Sisodia

CA Ravi Sisodia (Expert)

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.

Message likes : 1 times

CA Ravi Sisodia

CA Ravi Sisodia (Expert)

14 July 2010 it will not be treated as prior period income.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

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)

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)

14 July 2010 disclosed in notes of accounts.

CA Ravi Sisodia

CA Ravi Sisodia (Expert)

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..

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now