Dear Sirs,
A payment was made to a supplier in the last week of March 2010 and in lieu of booking it as a advance to party (since the material was to receive in april 2010) it was charged into expenditure head inadvertantly.
Later on, upon receipt of the material, the liability for goods received arisen upon receipt of the material in April 2010, is no mere required in the FY 2010-11 since it was already charged in expenditure head in FY 2009-10. Now please provide the accounting treatment of this liability appearing in the books in the FY 2010-11 which is no more required to be discharged .
The normal treatment for excess liability or provision not required to be discharged are being routed in the following way in our books for years together as the liability for goods received amount may be taken into other income through `liability/provision no longer required' head of accounts
Will it be prudent to take it into prior period income though it has not having any connection with the operation activity of the organisation, rather it has arisen due to an inadvertant mistake in the previous year and it has no connection with the business activity of the company.
Is it prudent to credit the expenditure head where it was debited in the last year.
Please reply at the earliest.
CAclubindia
