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Payment of provision for expenses

Harinder (student) (219 Points)

25 November 2011

Hi everybody,

My query is while finalising the accounts for 2010-2011, we had created provisions for audit and return filing charges at25,000.00, and the balances were carried forward to 2011-2012. Now the situation is the Audit and Return filling charges have actually billed for62,000.00.

I would like to know, how I can make entry of the Bills of62,000.00 and the its payment. How the provisions shown at the end of the year 2010-2011 will be adjusted against bills of Rs. 62,000.00.

Thanks in Advance.

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14 Replies

ashish gupta ( student) (1922 Points)
Replied 25 November 2011

Entry will be

Provision of audit fee A/c Dr 25000

Audit Fee/ professional exp Dr. 37000

To Bank A/c 62000

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CA Adithya Murali (Senior Associate Analyst) (119 Points)
Replied 25 November 2011

On creation of provision you would ve done the following

Audit fee Dr 25000

To outstanding expenses 25000

Now during the year after u receive the actual bill

Audit fee Dr 37000

Outstanding exp Dr 25000

To the Party i.e. Auditor s A/c 62000

Then u make payment

Auditor A/c 62000

To Bank

To TDS Payable

1 Like

Phalgun (Audit Manager) (327 Points)
Replied 25 November 2011

Ya agreed with above

valji (Accounts manager-MBA) (2150 Points)
Replied 25 November 2011

agree with above

RUPESH CHOUDHURY (Student) (484 Points)
Replied 25 November 2011

Prior Period Expenses(2010-11) A/c....Dr. 37,000

Sundry Creditors for Expenses A/c......Dr. 25,000

To TDS Payable A/c 6,200 (say 10 % )

To Bank A/c 55,800

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k.mukund (student) (52 Points)
Replied 26 November 2011

Agreed with Adithya

LALIT (STUDENT) (25 Points)
Replied 26 November 2011

RUPESH......why prior period??????????????????????????

Ateeq (CA - Final) (218 Points)
Replied 26 November 2011

Agreed with Aditya.

RUPESH CHOUDHURY (Student) (484 Points)
Replied 26 November 2011

Originally posted by : lalit
	RUPESH......why prior period??????????????????????????

Because that expense relate to the previous year which resulted deu to an error or ommission..as per AS -5.

manoj kumar (student) (41 Points)
Replied 27 November 2011

frnd,

In my opinion the entry for it should be as follows :

Provision for expenses A/c Dr. 25000

Prior Period exp. A/c Dr. 37000

TO Bank A/c Cr. 62000

(without considering TDS)

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Manoj R. Agrawal (Service) (86 Points)
Replied 29 November 2011

Agreed with Adithya

Baidyanath Chaudhary (Sr. Accounts Executives) (30 Points)
Replied 02 February 2012

What is deffer Tax & how to work out? Pls help....

Jitesh Golani (student) (60 Points)
Replied 16 February 2012

Hey friends, Prior Period expense arises as a result of errors or omissions to record the transaction in one or more financial years. However, in the current case, it is not a prior period expense
All the provisions are accounting estimates and difference arising beacuse of wrong accounting estimate does not qualify as a prior period expense. It is an expense relating to the previous year but not a prior period expense with regard to AS-5. The entry should be:

Professional Fees A/c Dr. 37000
Provision for Expenses A/c Dr. 25000
To, TDS Payable A/c 6200
To, Bank A/c 55800

Ashish (XYZ) (86 Points)
Replied 16 February 2012

I agree with Jitesh..

The effect of a change in an accounting estimate shall be recognised prospectively and not retrospectively as per the Accounting Standards.

Professional Fees A/c Dr.                             37000
Provision for Professional Expenses A/c Dr. 25000
To, TDS Payable A/c                                6200
To, Bank A/c                               55800