Save Rs 499 on a 2-Year Ad-Free CAclubindia Pro Membership. Subscribe Now!

(urgent help needed) Prepaid Business Expenses

248 views

Save Share

pr br

319 Points Posted on 11 March 2021

I run google ads for my business, google generate an invoice at the end of every month (for the payment we made during that month), suppose I add Rs. 10,000 to my google ads account this month ( MARCH 2021 ) , but out of this Rs.10,000 only Rs.2000 deducted from my google ads account during the MARCH month and rest balance(Rs.8,000) is carried over (it is there in google ads account only, not transferred to my bank).

can I show it (10k ) as a business expense in ITR or only 2,000?

Replies (6)

Quick Summary

This discussion clarifies how to report prepaid business expenses, specifically for Google Ads, on your Income Tax Return (ITR). The consensus is that you should only claim the amount actually deducted or spent from your Google Ads account within the tax period as an expense. Any remaining balance that is carried over is considered a prepaid expense and can be claimed in future periods as it is used. The timing and content of Google's invoices are crucial in determining how to account for these costs.

CA. Sourav Sarkar

Chartered Accountant

24588 Points Posted on 11 March 2021

Show only 2000 rupees as business expenses

CMA Poornima Madhava

CMA

13117 Points Posted on 11 March 2021

I agree with Sourav. ₹2000/- to be treated as business expenses for March 2021 and the rest can be shown under current assets which can later be debited to P&L as and when the expense is booked.

All would depend on the period for which the invoice is raised. If the invoice pertains only to March, then you may consider entire 10,000 as expense for the CY.