please tell me the accounting treating for recoverable expenditure. in my opinion it has to be deducted from expenditure. can any one procide me the source for the above treatment or in another way shall we consider as income. please help me on this
10 August 2010
According to me showing it as income is more suitable. As the representation (reducing it from the expenses) will not be possible in tally or erp. Moreover, it may be possible that you recover this amount in next year where as you actually incurred it in earlier year. So at the time of taking deduction of expenses in Income Tax problems may arise.
10 August 2010
If you are in the practice of raising the bill on the client towards the recoverable expenditure.. then these expenses can be shown as a net figure instead of showing it as income.
If the above practice is not there then perhaps the best thing is what sudhanshu has suggested.
10 August 2010
Showing it as a net figure is also not correct as in this case revenue and expenses both will reduced and all that places where preasumptive taxation or revenue are considered for calculation for taxation will be undervalued.
There is no point of coufusion in it. As per AS 9 revenue should be recognized when it is accrued or received as the case may be. If we agree with you then all the expenses which are incured by the business and recovered from the cutomers should not be accounted. But this is not the case. There are disclosure requirment as per AS 1. Financial statements should be prepared on true and fair view. If these requirements of different AS will not be followed then Financial Statements will not show true and fair view. So showing both revenue and expenses is important.
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