We will put provision for expenses to follow matching concept, expenses of the year should be booked in same year. when the expense is not sure we will make a provision. So suppose we made provision for expenses at 31st march 100000 Rs and it came to know at time of audit, bill was 150000 Rs, what can we do with the excess 50000?
if it is booked like this and paid 150000 in next year, Rs.50000 will be expense of next year. Is it correct?
Suppose if after audit we came to know the expense is more, can we show it as prior period item in next year financial as it is a error in estimation?
kindly help on this confusion.
Thank you
CAclubindia
