Is there a need to book bank guarantee charges levied by banks on pro-rata basis to the period of the bank guarantee i.e. if the bank guarantee is valid for 2 years the charges is it required to book the bank guarante charges equally in two years? Are there case laws on the subject. I recollect that there is a high court judgement which says that bank guarantee charges can be booked to expenses fully based on payment. Please help.
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Bank guarantee charges
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Prepaid expense is expense paid in advance but which has not yet been incurred.
Expense must be recorded in the accounting period in which it is incurred.
As BG charges is incurred in the year of sanction of BG, it should be bifucated in prepaid exp
Regards
Kunal.
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