Accounting of expenses

Hello CAclubindia,

Is is right to deffer the expenditure & allocate it throughout the year in equal proportion.

 

for eg: donation made of rs.80000 in the month of august 2012 so here the acctng entry passed was like this

1) Donation    A/c --------dr 80000

        to Cash/bank      A/c           80000

2) P/L A/c ----------------dr    8000

     prepaid Exp a/c ----dr 72000

           to Donation A/c                     80000

( Donation exp of Rs.8000 booked for the month of aug 2012 & remaining deffered for remaining months)

 

Is this the right way of accounting.

 

best regards

navin

Replies (1)

Dear Navinkumar,  there's no need to defer the donation expenses as there's no benefit arising to the organization from making such donations.

You need to debit the entire amount to P&L.  if the donation is eligible for tax benefit then at the time of assessing the taxliability you can claim the deduction u/s 80G restricted to 10% of the GTI.

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