Payment of provision for expenses

Entry will be

Provision of audit fee A/c      Dr  25000

Audit Fee/ professional exp  Dr. 37000

                          To Bank A/c                         62000

On creation of provision you would ve done the following

Audit fee Dr              25000

  To outstanding expenses      25000

Now during the year after u receive the actual bill

Audit fee Dr               37000

Outstanding exp Dr  25000

   To the Party i.e. Auditor s A/c   62000

Then u make payment

Auditor A/c    62000

         To Bank

          To TDS Payable

Ya agreed with above

agree with above

Prior Period Expenses(2010-11) A/c....Dr. 37,000

Sundry Creditors for Expenses A/c......Dr. 25,000

          To TDS Payable A/c                                        6,200 (say 10 % )

          To Bank A/c                                                    55,800 

Agreed with Adithya

RUPESH......why prior period??????????????????????????

Agreed with Aditya.

Originally posted by : lalit
	RUPESH......why prior period??????????????????????????

Because that expense relate to the previous year which resulted deu to an error or ommission..as per AS -5.

frnd,

In my opinion the entry for it should be as follows :

Provision for expenses A/c                     Dr.            25000

Prior Period exp. A/c                                Dr.           37000

   TO Bank A/c                                            Cr.                             62000

(without considering TDS)            

Agreed with Adithya

What is deffer Tax & how to work out? Pls help....

Hey friends, Prior Period expense arises as a result of errors or omissions to record the transaction in one or more financial years. However, in the current case, it is not a prior period expense
All the provisions are accounting estimates and difference arising beacuse of wrong accounting estimate does not qualify as a prior period expense. It is an expense relating to the previous year but not a prior period expense with regard to AS-5. The entry should be:

Professional Fees A/c Dr.               37000
Provision for Expenses A/c Dr.       25000
            To, TDS Payable A/c                          6200
            To, Bank A/c                                         55800

I agree with Jitesh..

The effect of a change in an accounting estimate shall be recognised prospectively and not retrospectively as per the Accounting Standards.

Professional Fees A/c Dr.                                       37000
Provision for Professional Expenses A/c Dr.       25000
            To, TDS Payable A/c                                                     6200
            To, Bank A/c                                                                   55800