CSR Unspent amount accounting treatment

Rakesh Rao (CA Final Student) (406 Points)

22 April 2020

If there is any unspent CSR amount we need to transfer to a separate Bank account. But do we have to create the provision and show it as CSR expense in the year in which it was to be spent?

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3 Replies

yasaswi gomes (My grammar is 💯 good I) (7285 Points)
Replied 22 April 2020

CSR expenses are provided at 2% on an average of three years profits. Fro example,

Year 1 PBT 10000

Year 2 PBT 20000

Year 3 PBT 10000

=40000/3*2%= 267₹ CSR expenditure. Some expenses are non tax deductible while others are. CSR Staff wages are included in this.

CSR expenses 167₹

CSR staff wages 100₹

To Payables 267₹

When expenses incurred are 167₹ only

Payables 167₹

To Cash a/c 167₹

The balance is transferred to profits back again as this past three years average PBT amount is deducted from current years PBT or reserves.

To Profit and loss 100₹

By gain (CSR activity) 100₹

This is because there is no clear accounting treatment available for money saved from CSR activity online.

No provision is required and over expenditures cannot be carried forward.

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yasaswi gomes (My grammar is 💯 good I) (7285 Points)
Replied 22 April 2020

Hi, upon further googling about Section 135 of Companies act, 2013, I found out about

Unspent Amount
- Contributed to Fund
- Marked for ongoing projects
In case unspent CSR amount contributed to a fund specified in Schedule VII to the Act, the same would be treated as an expense for the year and charged to the statement of profit and loss.
In case unspent CSR amount is related to Ongoing Projects, the same would be accounted based on the nature of such project.

So, if you contributed CSR money to a fund like Hurricane India, then it should be expensed. If you are undertaking a project to grow trees by yourself, the unspent money will be transferred back to CSR account.

CSR Activity 267₹

To unspent amount 100₹

To Cash 167₹

then debit as ‘By Cash 100₹’ in the CSR ledger credit balance rather than transferring it to profit and loss account.

To CSR reserve account 100₹

By Unspent amount 100₹