Hi every one
During the year ending 31.03.07, the entries were not passed for the outstanding salaries and security charges. The balance sheet was not filed with the income tax, since the income is below taxable limit, but given to the bank for taking a loan. Now these outstanding expenses, were paid during the financial year 2007-08.
Now how do you pass entries for the same?
Hi CVK
Thanks for you comments
Can you help me with the entry
Hope to see your reply soon
Regards
Rangarajan
Mr.Rangarajan, the entries for the above transactions are usual journal entries, which are as follows :
DEBIT Salaries (Prior Period) A/c
DEBIT Security Charges (Prior Period) A/c
CREDIT Bank A/c
Remember, these expenses SHOULD NOT BE included in the current year's salary or security charges respectively, as they relate to previous year. They should be separately shown under the head prior period items. However, these items will be disallowed by Income Tax authorities (in case you happen to file return for the current year) during the current year.
There was no provision made for outstanding salaries, thus this wil be treated as error of omission. You should pass the following entry and disclose the notes under accounting standard 5-Net Profit and Loss, Prior Period Items,Extra Ordinary Items.
Prior Period Items (Salary for the month of March) a/c Dr.
Salary (current financial year salary) a/c Dr.
To Cash/ Bank a/c
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