Revised schedule vi

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vineet

article assistant

47 Points Posted on 30 March 2012

As per new Schedule VI, "trade payables shall be classified as 'trade payable' if it is in respect of

amount due on account of goods purchased or services received in the normal course of business".

Now my question is whether the expenses such as telephone exp, travelling exp, power consumption which are incurred to sale the product or even auditors fees and expenses should be shown as under the head Trade Payables because as per the client these expenses are part of normal course of business.

Replies (2)

Giridhar S Karandikar

Team Lead

5675 Points Posted on 30 March 2012

Trade Payables means the creditors whihc are created on account of carrying on the actual business activity, so they are classifeid as Trade Payables. For Instance if you are in the business of manufacturing garments, then the raw material purchased for preparing the garments would be a trade payable as it is created for running the business directly.

Other creditors for expenses are not created for the purpose of carrying on the business, but they are created as a result of non-trade activities to make the business run. For instance electricity expense is incurred, because for running the machines power is requried. Hence though these are not in the nature of trade they are incurred for running the business, so they should be classifed as 'Other Creditors' as per the revised Schedule VI