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Advance tax paid to firm

gaddala ramesh (163 Points)

23 March 2023

advance paid by firm is an expense or capital

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Ayush (Executive ) (6760 Points)
Replied 23 March 2023

If the advance payment is made for a current expense that will be consumed within the current accounting period, it will be treated as an expense. For example, if the firm makes an advance payment for rent or supplies that will be used up in the current accounting period, it will be treated as an expense.

However, if the advance payment is made for an asset that will provide future economic benefits beyond the current accounting period, it will be treated as a capital expenditure. For example, if the firm makes an advance payment for the purchase of machinery or property, it will be treated as a capital expenditure.