An entity gives advance to its employer in the year 2008-09. The employer incurrs the expenditure in 2008-09, but doesn't get the advance adjusted in the same year. The advance is adjusted in 2009-10. Will it be booked as prior period expenses in the books of accounts? The bills belongs to 2008-09 only.
Dear Rahul,
Good question Bhai..........!
YES, it will be recognized as Prior Period Item in FY 2009-10.
The present case cannot be coverd behind the curtain of organization's accounting policy to consider it as a item of expense for the FY 2009-10.
If any organization is doing this then such poilicy should be disclosed by way of notes to accounts in the Financial statements, Further the auditor is required to qualify his report.
Naveen Fintech Pvt Ltd
Kolkata
CA Inter
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