Dear Sirs,
One of our client (a Pvt. Ltd. Co. havin turnover around 30crores) has paid a Statutory liability (Municipal Tax) amounting to Rs.7,00,000 in the current year . Out of the Rs.7,00,000 paid only Rs.80,000 pertains to the current year and the balance Rs.6,20,000 belongs to the Previous years.
In the previous years company had i) not made any Provision for this amount, but they ii) had made disclosure in the Notes to A/Cs under the head Contingent Liability (AS 29) for an amount of Rs.9,00,000.
1) In view of the above facts kindly suggest what treatment should be given in the Books of Accounts for the Current financial year (as far as the amount of Rs.6,20,000) is concerned.
(i.e.whether we should apply AS-4 or AS-5)
2) Should this amount of rs.6,20,000 be considered as a "Prior Period Item" under AS-5 since no provision was made earlier?
3) How must it be disclosed in Notes to Accounts
Kindly reply at the earliest. (URGENT)
Thank you
CAclubindia
