What should be the accounting?
This query is : Resolved
10 December 2013
If i have paid insurance premium for company office premises for the periosd ofrm 24 march 2013 to 23 march 2014 of INR 29500 plus srvice tax @ 12.36% of INR 3346. On 31 march 2013 how should i book my insurnac epremium exp for the year ending on 31 march 2013?
Should i account entire service tax paid as expense in for the year or i should proportionately expense off cenvat credit also in accounting?
i.e 29500*8/365=647 or 647+3646(CENVAT Credit)=4293 in books as on 31 march 2013?
Please reply urgently.
Should i account entire service tax paid as expense in for the year or i should proportionately expense off cenvat credit also in accounting?
i.e 29500*8/365=647 or 647+3646(CENVAT Credit)=4293 in books as on 31 march 2013?
Please reply urgently.
Vivek Hebbar
(Expert)
10 December 2013
Dear Jaimin
First of all, service tax account is not an income or expense account. Service tax collected is accounted as a liability and the payment of service tax is adjusted against the said liability account either as cenvat credit or actual payment of service tax amount to the Government.
As regards the basic premium amount, you need to break-up the amount period-wise and accordingly recognise the same as expense in the financial statements of the respective periods. In your example, for the year 2012-13, part of the amount (8 days) will be expensed in that year and the balance will be carried forward as prepaid insurance (current asset). With respect to the service tax amount, you can claim the entire amount as cenvat credit since the entire service tax has been paid. Hence you need not proportionately carry forward the service tax portion. You can set off the entire amount against your service tax liability.
First of all, service tax account is not an income or expense account. Service tax collected is accounted as a liability and the payment of service tax is adjusted against the said liability account either as cenvat credit or actual payment of service tax amount to the Government.
As regards the basic premium amount, you need to break-up the amount period-wise and accordingly recognise the same as expense in the financial statements of the respective periods. In your example, for the year 2012-13, part of the amount (8 days) will be expensed in that year and the balance will be carried forward as prepaid insurance (current asset). With respect to the service tax amount, you can claim the entire amount as cenvat credit since the entire service tax has been paid. Hence you need not proportionately carry forward the service tax portion. You can set off the entire amount against your service tax liability.
Vivek Hebbar
(Expert)
11 December 2013
Dear Jaimin,
I have given the logic, all you need to do is pick up the calculator and type.
Rs.646 to be expenses in FY 12-13,
Rs.28,854 to be shown as prepaid expense in balance sheet under current assets in FY 12-13. The same to be expensed out in FY 13-14
I have given the logic, all you need to do is pick up the calculator and type.
Rs.646 to be expenses in FY 12-13,
Rs.28,854 to be shown as prepaid expense in balance sheet under current assets in FY 12-13. The same to be expensed out in FY 13-14
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