Provisons of Expenses in Accounts

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Querist : Anonymous

Querist : Anonymous (Querist)

05 April 2011 Hi Folks

Can anyone guide me for the below mentioned case.

One company has received a bill of Rs. 1 Cr from MD said that out of this amount Rs.60Lakhs are fix to pay to this party but about rest of the amt no one sure.

-here, the question arise that by how much amount we should provide the same on balance sheet date?
-Whether Rs.1Cr or the Rs.60 L.
-Moreover the TDS would be highly affected in the overall transaction to associates in the accounts.

Regards

CA Navin Jain

CA Navin Jain (Expert)

05 April 2011 you can make the provision either of Rs. 1 cr of rs. 60 lacs.

tds would be deducted on the provision amount.

you can make the provision of Rs. 1 cr since u have the bills.

and you need to make the provision of rs. 60 lacs since bills amount has passed for rs. 60 lacs.

so., in my opinion u need to make provision of rs. 60 lacs and deduct tds also on rs. 60 lacs

Querist : Anonymous

Querist : Anonymous (Querist)

05 April 2011 My dear friend here the biggest question has been raised by the Auditor to make the same by Rs. 1 Cr.
-Points to be consider while analysing .

1.Our company MD is on the opinion to have the Liability of Rs. 60 Lacs only , if we provide the same then the auditor is not agree with us. moreover the counter party is also not satisfied due to the less amount of the TDS amount in form 16 .

2. If we are providing at Rs.1 Cr then our profit is down & our company is funded by the PFI so they insist to have the profit in books .

Pls reply.

Pankaj Gandhi Jaiswal

Pankaj Gandhi Jaiswal (Expert)

05 June 2011 Provision to be made on ascertain liability. In this case you are going to make provision only. make provision of ascertain liability only, when final bill will come then see the genuineness of the bill and their approval process.

If you MD have given final bill then check company SOP & PO prepared for this, if SOP & PO permit full 1 Cr then book 1 CR and if not then book approved amount as per SOP & PO

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