X Co. Ltd signed an agreement with its employees union for revision of wages in June,2004. The wage revision is with retrospective effect from 1.4.2000. The arrer wages upto 31.3.2004 amounts to Rs. 80 lakhs. Arrer wages for the period from 1.4.2004 to 30.6.2004(being the date of agreement)amounts to Rs.7 lakhs.
what is ur query. please elaborate..
This question was taken from a previous CA exam. My question is in above case how will be the treatment as per AS?
The Treatment would be as per AS-4. Retrospective Revision of wages is not a Prior Period Item. Treat it simple transaction and charge the arrears in P/L Account. However, the Arrears Amount should be shown separately in P/L Account considering the AS-5 (Being it is Material item and it will affect ur Profit or Loss)
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