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When expenses payable to be reversed??

CA Manikandan Raghunath ( ) (609 Points)

23 November 2010

A certain amount is credited in the expenses payable account every year.. But no payment has been made against these expenses. This is being done for more than 5 years.

Should the amount credited be reversed. If yes, when it should be reversed??

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2 Replies

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 23 November 2010

Hi MRM,

You have not mentioned which amount is shown as payable .... whether they are statutory dues or any normal expenses payable?

In case if statutory dues are payable, you can't simply reverse entry. You have to pay that amount with penalty and then reverse payable amount.

In case of any normal expenses, first see whether there are chances that you will require to pay that in future. If substantial chances are there that you will not be liable to pay that amount then reverse it. For example - in accounts there may be normal expenses payable like service charges payable in respect of any service provided etc. In five years he must have forgot that amount. Hence, reverse it if this is the case.

But, if there are chances that you will require to pay that then don't reverse it. Fisrt pay that amount and then reverse.