17 March 2010
We have made provision for expenses in the previous year 2008-09 for the expenses to be incurred in the current year 2009-10 of previous year.Now if all expenses of previous year adjusted against provision for exp in the current year 09-10.my query is if balance exists in the provision for exp account in the current year 09-10 then what is accounting entry to adjust the balance?
17 March 2010
There are chances that the amount as per actual bills is more or less as compared to ad-hoc provisions made in the previous year. Shortfall may be booked as expenses in the current year while the excess may be reversed to the profit and loss account. If the difference is material then the same may be classified as Prior Period Items.
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