Journal entry for csr expense

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ANIMESH PANDEY (Querist)
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16 February 2018 Dear Sir,
We are company and we have created privision for CSR expenses . Now we want to spend on CRS activities .
1) What should be the journal entry?
2) We have a religious trust to , can donation to that trust be treated as CSR expenditure ??

Pls advise

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 July 2024 Certainly! Let's address your queries regarding CSR (Corporate Social Responsibility) expenses and donations to a religious trust:

### 1. Journal Entry for CSR Expenses:

Assuming your company has already created a provision for CSR expenses and now wants to spend on CSR activities, here's how you would typically make the journal entries:

#### Provision Creation Entry (if not yet created):

If the provision for CSR expenses has not been created earlier, and you're directly booking the expense:

**Journal Entry:**

Dr. CSR Expenses Account (Profit & Loss Account)
Cr. Bank Account (or relevant payment method)

**Explanation:**
- Debit the CSR Expenses Account to recognize the expense incurred for CSR activities.
- Credit the Bank Account (or relevant payment method) to record the outflow of funds.

#### Utilization of Provision (if provision was earlier created):

If a provision for CSR expenses was created in a previous accounting period and you're now utilizing it:

**Journal Entry:**

1. **Reverse Provision Entry (if provision exists):**

Dr. Provision for CSR Expenses Account (Current Liability)
Cr. CSR Expenses Account (Profit & Loss Account)

**Explanation:**
- Debit the Provision for CSR Expenses Account to reverse the provision previously created on the balance sheet.
- Credit the CSR Expenses Account to recognize the actual CSR expenditure in the Profit & Loss Account.

2. **Actual Expenditure Entry (when expenditure occurs):**

Dr. CSR Expenses Account (Profit & Loss Account)
Cr. Bank Account (or relevant payment method)

**Explanation:**
- Debit the CSR Expenses Account to record the expenditure on CSR activities.
- Credit the Bank Account (or relevant payment method) to record the payment made for CSR activities.

### 2. Donation to Religious Trust as CSR Expenditure:

According to Section 135 of the Companies Act, 2013, and the Companies (Corporate Social Responsibility Policy) Rules, 2014, expenses incurred by a company towards CSR activities should primarily benefit areas specified in Schedule VII of the Act. These areas typically include education, healthcare, environmental sustainability, etc.

**Regarding donations to a religious trust:**

- **Eligibility**: Donations to religious trusts are generally not considered CSR expenditures unless they serve a specific purpose that aligns with Schedule VII of the Companies Act, 2013.
- **Criteria**: If the religious trust is engaged in activities that fall within the categories specified in Schedule VII (e.g., educational activities for economically backward classes conducted by the trust), donations to such trusts may qualify as CSR expenditure.
- **Verification**: Ensure that the donation is for a genuine CSR purpose and aligns with the company's CSR policy and objectives.

**Journal Entry for Donation to Religious Trust (if it qualifies as CSR expenditure):**

Dr. CSR Expenses Account (Profit & Loss Account)
Cr. Bank Account (or relevant payment method)

**Explanation:**
- Debit the CSR Expenses Account to record the donation made to the religious trust as CSR expenditure.
- Credit the Bank Account (or relevant payment method) to record the payment made.

### Conclusion:

- **Journal Entries**: Use appropriate entries to either directly book CSR expenses or reverse and utilize provisions already created for CSR expenses.
- **Donation to Religious Trust**: Verify if the donation meets the criteria under Schedule VII of the Companies Act, 2013, for it to be treated as CSR expenditure.

Consult with a qualified accountant or tax advisor to ensure compliance with all applicable laws and regulations regarding CSR expenditures and donations, especially when considering donations to religious trusts.