Hello Caclubindia,
the issue is in the P.Y 12-13 the client had reconciled his fixed assets block, stating that the assets were no longer existing physically but can be seen in the gross block (pertaining to past years) so all such items has been written off from the books & anything over & above the cost is debited or credited to Profit & Loss A/c so can these items qualify as prior period items.
and also tell me there implication under income tax act.
What do you mean by over & above the cost. Can you pls provide an example for the issue under consideration.
Ohhh Sorry my mistake its not over & above its the amount of asset lying in the block without any physical existences.
for eg: the client has transferred old furmiture & fixtures to repairs & maintenance account during current year on which dep has been fully charged.
How can you transfer the balance in asset account to repairs & maintenance. It's not possible. It needs to be w/o to the P&L directly. by debiting Assets W/O Acount and crediting Asset account.
So w/o the assets to P&L does not come under the purview of Prior Period items.
But ultimately it will shown in P/L a/c right only the we have to change the account head to be debited.
And mr.Giridhar pls help me under which head i have to prepare asset W/off A/c.
It should come under Indirect Expenses.
But will there be any problem if i show it under repairs & maintenance instead of asset W/off a/c.
What documentary evidence you will produce before the AO if the cas comes up for scrutiny. Then the amt may be disallowed.
so better was is to show that under asset w/o.
also considering the basic accounting principle of prudence we cannot show an expenditure of a particular nature under the other ehad. For e.g if you purchase stationery you cant show it as say telephone exp.
so the nature of the exp/loss shud be always shown under the proper head.
Okk thanks a lot i get it now.....
CAclubindia
