Hi,
I am into a business and I would like to know, if we need to divide the business expenses that are paid for entire year, while filing returns,
eg, If I subscribe for annual broadband connection in the month of december , then do I have to divide the expense on pro-rata basis for dec, jan, feb, mar into current financial year and apr, may ... into next financial year.
no, need to divid exp., u can account entire amount in a day of exp incurred
Nitin,
The answer to your question will change from case to case.If the amount is not material i.e. it contributes only 1-2% of the total expenses debited to profit & loss account then it is not necessary to divide the expenses.
But if constitutes substantial part of your expenses, then it is advisable to divide the expenses.For eg:-insurance of machinery, labourers, etc. constitute a major portion and is divided into the current financial year and next financial.In the current financial year it is shown as prepaid insurance.
| Originally posted by :thangam | ||
| " | no, need to divid exp., u can account entire amount in a day of exp incurred | " |
Thanks
Fatema is right .Even in case of heavy Advertisement expenditure a portion of it is taken as Deferred expense as benefits accrue over a period of years and written off accordingly
CAclubindia
