Is it mandatory to pass provision entry for salary for each month or no need to pass in the books of account. Is it good to pass entry in the month of payment means next month only. Plz support your answer with AS or notification something.
09 June 2015
AS-1 Requires the concept of Accrual. The Salary for the month of March is only required to be Provisioned due to financial year closing. Otherwise there is no need of making provision for all months except march
09 June 2015
As per Indian AS-1: Presentation of Financial Statements, accrual basis of accounting is one of the basic accounting concept and policy to be adopted by business entities. When the accrual basis of accounting is used, an entity recognises items as assets, liabilities, equity, income and expenses (the elements of financial statements) when they satisfy the definitions and recognition criteria for those elements in the Framework.
Thus, entry need to be passed for salary provision on monthly closure in the books of account where accounts are maintained on accrual basis as against payment basis.
10 June 2015
Though it is not mandatory to make provision in accounts for all expenses and incomes, it is acceptable practice for business entities which needs to maintain books based on accrual basis and preparations of financial statements on periodical basis ex: Quarterly, Half yearly as stipulated by other acts like SEBI, RBI, Companies Act etc,
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