An entity gives advance to its employer in the year 2008-09. The employer incurrs the expenditure in 2008-09, but doesn't get the advance adjusted in the same year. The advance is adjusted in 2009-10. Will it be booked as prior period expenses in the books of accounts? The bills belongs to 2008-09 only.
1 Replies
Amir
(Learner)
(4016 Points)
Replied 23 March 2010
Dear Rahul,
Good question Bhai..........!
YES, it will be recognized as Prior Period Item in FY 2009-10.
The present case cannot be coverd behind the curtain of organization's accounting policy to consider it as a item of expense for the FY 2009-10.
If any organization is doing this then such poilicy should be disclosed by way of notes to accounts in the Financial statements, Further the auditor is required to qualify his report.
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