Provision Vs Prior period expenses
This query is : Resolved
26 March 2008
1. Is there any disallowance of expenses if provision is not made ?
2. Is it complusory to create provision ?
3. Can provision be created for purchases ?
4. why prior period expenses are disallowed ?
5. what if I paid the expense of march in april ?
2. Is it complusory to create provision ?
3. Can provision be created for purchases ?
4. why prior period expenses are disallowed ?
5. what if I paid the expense of march in april ?
26 March 2008
1 yes, as prior period exp.
2 as per prudence principle & co. law we have to maintain a/cs on accrual basis.
3 yes, if ur a/c policy permits so.
4 because of matching concept.
5 make a provision in march if exp belongs to march.
2 as per prudence principle & co. law we have to maintain a/cs on accrual basis.
3 yes, if ur a/c policy permits so.
4 because of matching concept.
5 make a provision in march if exp belongs to march.
27 March 2008
In respect of point no. 4, i would like to clarify u as under:
Under Income tax, all the revenue expenditure are allowed as expenditure if and only if it is incurred during the relevant previous year. "Exp Incurred" signifies any expenditure paid or payable for the events/transactions occurred during the year
Under Income tax, all the revenue expenditure are allowed as expenditure if and only if it is incurred during the relevant previous year. "Exp Incurred" signifies any expenditure paid or payable for the events/transactions occurred during the year
CA. GOPAL SONIKA
(Expert)
27 March 2008
As a prior period disallowed.
You should create provision as per accounting principles
You should create provision as per accounting principles
CA. Kirti S. Ganatra
(Expert)
27 March 2008
1. No, there is no disallowance if provision is not made
2. If you are applying accrual base accounting you must provide expenses
3. Yes you can provide provision for purchase
4. Prior expenses are not relate to that year so disallowed. But if you fully go through asst procedure it is not disallowed. You can charge in the year to which it pertains in assessment proceeding. If asst completed than you can not reassess for prior period expenses
5. Not a problem, make a provision for expenses. Usually balance sheets are completed in June-July months. so you know that this is the expense of march that you paid in April. So, you can make a provision and it is not estimate base.
2. If you are applying accrual base accounting you must provide expenses
3. Yes you can provide provision for purchase
4. Prior expenses are not relate to that year so disallowed. But if you fully go through asst procedure it is not disallowed. You can charge in the year to which it pertains in assessment proceeding. If asst completed than you can not reassess for prior period expenses
5. Not a problem, make a provision for expenses. Usually balance sheets are completed in June-July months. so you know that this is the expense of march that you paid in April. So, you can make a provision and it is not estimate base.
27 March 2008
YES KIRTI S. GANATRA IS CORRECT
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