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Direct and in direct expenses for ca firm

roopanand (no) (178 Points)

07 February 2012

FRIENDS IS SALARIES PAID BY A CA TO HIS EMPLOYEES IS A DIRECT EXPENSE OR INDIRECT EXPESE CAN U PLEASE SEND ME DIFFERENCE BETWEEN THEM THE SAME FOR ANY LAWYER IN PRACTICE

durining the preparation of accounts for a lawyer what is direct and indindirect expense.

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10 Replies

puneet khanna (student) (66 Points)
Replied 07 February 2012

indirect exp

direct exp is related to mfging unit

& indirect is meant for others

for eg wages fall under direct exp.

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CA AMIT KUMAR SIKARWAR (Article Clerk) (25 Points)
Replied 07 February 2012

Dear,

Salary is always direct expenses, whether the salaries is paid by CA firm or any other law firm. salary never directly linked to the nature of the business of firm/ comapany etc.

Thanks & Regards

CA Amit Kumar Sikarwar

E-mail- caamitkumarsikarwar @ gmail.com

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 07 February 2012

Please note that in case of professionals like CA/lawyers etc,, we are required to prepare an Income & Expenditure account instead of the P&L account. In I&E account unlike the P&L there is no concept of direct or indirect expenditure. All the receipts are credited to the Income side & all the expenses wheter direct or indirect are debited to the expense side. The balance is either an Surplus or an deficit whihc is transferred to the proprietor's capital account.

Ankit (CA Final) (75 Points)
Replied 08 February 2012

Agreed with Giridhar Sir

Mohammad Vaseem (Asst Accountant) (77 Points)
Replied 08 February 2012

GIRIDHAR S KARANDIKAR JE IS CORRECTELY DEFINE THE SOLUTION TO THE ABOVE CASE. SALARY OF CA OR ANY DIRECTOR WILL BE TREATED AS INDIRECT EXPENSES ONLY IN A FIRM/COMPANY WHER P&L ACCOUNT PREPARED.

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Mohammad Vaseem (Asst Accountant) (77 Points)
Replied 08 February 2012

GIRIDHAR S KARANDIKAR JE IS CORRECTELY DEFINE THE SOLUTION TO THE ABOVE CASE. SALARY OF CA OR ANY DIRECTOR WILL BE TREATED AS INDIRECT EXPENSES ONLY IN A FIRM/COMPANY WHERE P&L ACCOUNT PREPARED.

Mohammad Vaseem (Asst Accountant) (77 Points)
Replied 08 February 2012

GIRIDHAR S KARANDIKAR JE IS CORRECTELY DEFINE THE SOLUTION TO THE ABOVE CASE. SALARY OF CA OR ANY DIRECTOR WILL BE TREATED AS INDIRECT EXPENSES ONLY IN A FIRM/COMPANY WHERE P&L ACCOUNT PREPARED.

Goutham (Goutham Tax Consultancy) (31 Points)
Replied 20 December 2018

Income and expenditure is prepared for non profit organisations. How can a CA prepares income and expenditure account? The answer given above is incorrect. For CA and Lawyers, salary is directly linked with his production (services) and it is direct expense

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 20 December 2018

dear goutham please note that trading and P&L is prepared only in respect of persons carrying on trading and manufacturing activity, and also they are required to maintain stock.
for professionals no trading or manufacturing activity is being carried out and also there's no question of stock except in case of a doctor who is required to maintain a stock of his medicines in the register as prescribed. So an simple Income&Expenditure is being prepared. There is no such concept of direct and indirect exp for I&E account. But if you want to prepare an analysis then it can be considered as direct exp

Goutham (Goutham Tax Consultancy) (31 Points)
Replied 20 December 2018

Your are correct only for these: * Reply about trading and P and L Account * Stock related But further clarity is required for whether Income and Expenditures Account applicable to CA? In my opinion, only NGO(non profit organisations) will prepare I and E Account and not other business and professionals