Accounting entry

we have increase our liability at a c.y

@ Rudrayani Shedjale : Can you please elaborate that what entry made in previous year for this transaction?

Hi,

This transaction pertains to Error of Omission. 

The same will be corrected in the subsequent year.

However, we should ensure that the Current year Income or Profit is not effected because of this.

 

In this example, Record the liability in the current year and if the transaction is effecting the  P&L then, Charge it after arriving the Net income.

1. Record the liability

2. JE for the P&L Effect:

Interest on Loan is adjusted as a prior period item after arriving current year income..

 

Hope this clarifies !

@ Kumar Sushank
@ Chetan Raju
Individual had given an amount to a company which is missing in individual's book of accounts. in current year company repaid the amount to individual.
so JV in individual book
Advance to company (loan & advances) Dr
to Bank A/C Cr (bank balance must be more than actual as the entry missed in previous year)
when company repays the amount in current year, receipt entry as
Bank A/C Dr
advance to company A/C CR.

so in this case it's not affecting P&L as no nominal accounts are involved.
please advise if correction needed