prior period item

Nothing special treatment in tax laws for prior period items.....change in AP is not prior period item. Read AS 5.

thanks saurabh

 I think The Text below will help u to understand

• The term 'prior period items', as defined in this Standard, refers only to income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods. The term does not include other adjustments necessitated by circumstances,which though related to prior periods, are determined in the current period, e.g.. arrears payable to workers as a result of revision of wages with retrospective effect during the current period.

•  Errors in the preparation of the financial statements of one or more prior periods may be discovered in the current period. Errors may occur as a result of mathematical mistakes, mistakes in applying accounting policies, misinterpretation of facts, or oversight.

•  Prior period items are generally infrequent in nature and can be distinguished from changes in accounting estimates. Accounting estimates by their nature arc approximations that may need revision as additional information becomes known. For example, income or expense recognised on the outcome of a contingency which previously could not be estimated reliably does not constitute a prior period item.

• Prior period items are normally included in the determination of net profit or loss for the current period. An alternative approach is to show such items in the statement of profit and loss after determination of current net profit or loss. In either case, the objective is to indicate the effect of such items on the current profit or loss.

prior period items should be disclosed in tax audit report that is Form 3 CD. 

Originally posted by : SHWETA GERA
	I think The Text below will help u to understand The term 'prior period items', as defined in this Standard, refers only to income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods. The term does not include other adjustments necessitated by circumstances,which though related to prior periods, are determined in the current period, e.g.. arrears payable to workers as a result of revision of wages with retrospective effect during the current period.  Errors in the preparation of the financial statements of one or more prior periods may be discovered in the current period. Errors may occur as a result of mathematical mistakes, mistakes in applying accounting policies, misinterpretation of facts, or oversight.  Prior period items are generally infrequent in nature and can be distinguished from changes in accounting estimates. Accounting estimates by their nature arc approximations that may need revision as additional information becomes known. For example, income or expense recognised on the outcome of a contingency which previously could not be estimated reliably does not constitute a prior period item. Prior period items are normally included in the determination of net profit or loss for the current period. An alternative approach is to show such items in the statement of profit and loss after determination of current net profit or loss. In either case, the objective is to indicate the effect of such items on the current profit or loss.

Very GOOD Explanation ...keep Going

Gift received in kind is taxable if Fair maket value of gift is more than 50000. Prior to PY 2009-10 gift in kind is not taxable.

as per income tax act, 1961 the incomes and expenses are taxable and allowed as per the regular accounting method followed by the assessee. i.e Mercantile or Cash Basis.

here in this case the expenses is a prior period item Hence, it is not an allowable expense while computing tax for current previous year.