Provision for salary

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 June 2015 Dear Expert,

Is it mandatory to pass provision entry for salary for each month or no need to pass in the books of account. Is it good to pass entry in the month of payment means next month only. Plz support your answer with AS or notification something.

Thanks in advance

JUGAL PATEL

JUGAL PATEL (Expert)
Follow

09 June 2015 AS-1 Requires the concept of Accrual. The Salary for the month of March is only required to be Provisioned due to financial year closing. Otherwise there is no need of making provision for all months except march

CA. Subhash Dangi

CA. Subhash Dangi (Expert)
Follow

09 June 2015 As per Indian AS-1: Presentation of Financial Statements, accrual basis of accounting is one of the basic accounting concept and policy to be adopted by business entities.
When the accrual basis of accounting is used, an entity recognises items as
assets, liabilities, equity, income and expenses (the elements of financial
statements) when they satisfy the definitions and recognition criteria for those elements in the Framework.

Thus, entry need to be passed for salary provision on monthly closure in the books of account where accounts are maintained on accrual basis as against payment basis.

Querist : Anonymous

Querist : Anonymous (Querist)

10 June 2015 Thanks

I want to know for other months provision except March. Is it mandatory to create provision for all 12 months at the end of the each month

CA. Subhash Dangi

CA. Subhash Dangi (Expert)
Follow

10 June 2015 Though it is not mandatory to make provision in accounts for all expenses and incomes, it is acceptable practice for business entities which needs to maintain books based on accrual basis and preparations of financial statements on periodical basis ex: Quarterly, Half yearly as stipulated by other acts like SEBI, RBI, Companies Act etc,

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

Summarize this with AI

ChatGPT Perplexity Claude Google AI Grok