i was having a doubt that vechicle taxes paid for futures years ..........whether it should be accounted in the year in which it is paid or it should be trated as prepaid expense and bought to the p&L a\c in the corresponding years..........................but in IT act it is said that rates and taxes paid for future years should be claimed as expense in the year in which it is paid........Looking forward to ur reply.....................
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prepaid vechicle tax
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good question
Hi Shibin ,
Its like Insurance premium.As per IT act also Insurance premium paid during the year will be allowed even if pertains to future period , but as per accounting treatment we r debiting the expense pertains to future period to PREPAID EXPENSE.so Rates & Taxes prepaid for future period has to be taken to Prepaid Expenses and has to reversed in subsequent years.
raghavan is right,
Actually The treatments prescribed by the IT Act should never be confused with it's Accounting Treatments. Talking about the very basics, The Matching Concept is clear about the issue, and prescribe it to be treated as prepaid.
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