Accounting of prior year expenses

The Journal Entry   will be

Audit Expenses A/c      Dr   100000

Prior period expenses   Dr    50000

Bank A/c                     Cr   150000

As per AS-5 the nature and amount of prior period items should be separately disclosed in the statement of Profit and Loss in a manner that their impact on current profit or loss can be preceived.

Hope this will be helpfull.

Thanks

Venugopal

Generally, prior period expenses booked in current year is disallowed in the income tax assessment for current year. If you can impress your tax auditor such that they do not report in Form 3CD then you may take a chance by not disallowing voluntarily but wait for AO to do it.

Regards,

thanks guys for your revert.

Can you advice on the expenses towards professional fees by an auditor for previous Assessment years or appeals etc. say i recd an invoice in the current year and date (FY 14-15) from company CA for fees towards assessment year for FY 12-13 or earlier. Obviously this will not be provisioned earlier and hence i assume this should be considered expense of current year by auditor as well as AO

thank you

can you clarify on this. Nd prior period items is disallowed undr income tax.

'thanks

Only errors and ommisions will be considered for booking in prior period. Short provisions can be booked under current year. Prior period items can't be disallowed under IT legal cases are there .

thank you

so you mean the short provisions will be allowed as expenses in income tax is it. whereas errors if any in prior years corrected in current year will be disallowed 

Book short provisions in the current year. Prior period expenses can't be disallowed.

Dear Sir,

Please can you help me with this point that had expense for last year without any provision and this year we received invoice for the same with current date. The matter in invoice mantion the period of last year so its necessary to book provision for the same and deduct tds for the same from last year or we can booked in current year and tds deducted in same month of booking without interest.

Yes you are right. Even errors also if it is proved that genuine ommissions and income related to that expenses accounted in earlier year and tax paid on it . Judgements are there.

Sir My Question is that if I booked expenses for Jan to March but invoice received dt 15/04/2017 and period not mantion in invoice can i book the invoice in current year and deduct tds in the same month and paid to party. there is no proof kind of consultancy services for Jan to March so will save Penalty and Interest ... Right

You book the invoice in current year and deduct tds in the same month and paid to party. No liability should have been created for this invoice.