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Telephone expenses

Shivani (Learner) (1881 Points)

14 December 2013

Dear Members

X Ltd. normally gets a telephone bill between the range of Rs. 2000 to Rs. 3000 p.m.

Now for the month of March, it has yet to receive the bill which it will normally receive in April.

Telphone bill is related to March which will come in April and X Ltd. also doesnt know how much bill will come.

What journal entries shall X Ltd. pass in the month of March?

Regards

Shivani

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7 Replies

Subhash (None) (122 Points)
Replied 14 December 2013

Hello,

1. You can simply create a payable account.

Telephone Bill a/c Dr 2500
To, Telephone Bill Payable a/c Cr 2500

2.When you actually paid:

Telephone Bill Payable a/c Dr 3000
To, Cash a/c Cr 3000

If you have taken Rs. 2500 as payable but Rs. 3000 has actually been paid, then you can pass the above entries.

The difference in the Telephone Bill Payable a/c can be written off to P & L a/c

Regards,
Subhash.

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Shivani (Learner) (1881 Points)
Replied 14 December 2013

Dear Subhash

I dont think your entries are right.

When we make an expense due, we debit the expense and credit the liability account.

You mentioned the opposite.

Also you didnt tell by what amount the due entry to be created.

We dont know how much telephone bill of March will come in April.

shivani

Dhanasekaran D (Intern at R S & Co Chennai) (193 Points)
Replied 14 December 2013

Mr. Subaash, Your entries are not correct...

I think businesses normally, to close their books, take around three to four weeks time...

so when the recieve the bill within 10th of april... they will pass an back dated expense booking entry (companies normally can pass back dated entries), for which only few are authorised in case of ERP systems...

entry date in books can be actual entry date say 10th april in this case

posting date will be 31st march

telephone expenses a/c dr. (actual)

to service provider a/c....... (actual)

and the payment entry will be

Date: actual date of payment

service provider a/c dr (actual)

to bank a/c........................(actual)

I hope this clears your duoubt,... if not please post your reply mam...

Subhash (None) (122 Points)
Replied 14 December 2013

Yeah I am extemely sorry for the mistake.

I have edited my reply. Sorry!

Shivani (Learner) (1881 Points)
Replied 14 December 2013

Dear Dhanasekran Sir

What about the service tax component?

Suppose X Ltd. is registered with Service Tax.

Further suppose bill of Rs. 3000 plus service tax 12.36% comes on April 10.

Now when shall X Ltd. claim input service tax on 31st March or on the date of payment?

Shivani

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Dhanasekaran D (Intern at R S & Co Chennai) (193 Points)
Replied 14 December 2013

if the bills are recieved before filing monthly returns... then the credit can be taken for march... else on the next month only... for VAT we can take input tax credit within the financial year or within six months from the date of transaction, whichever is later....

for service tax, The CENVAT credit in respect of input service shall be allowed, on or
after the day on which the invoice/bill/ challan, is received by the service recipient.

After availing/taking the credit as above, the service recipient is required to make payment of value of service along with the service tax mentioned on such invoice/bill/challan within three months from the date of issue thereof, otherwise the credit is required to be reversed. In case the said payment is made later, the assessee can take credit with respect to such payment at that point in time. In case input service tax is paid on reverse charge basis, CENVAT credit for such service is allowed on or after the day on which payment of the value of input service and the respective service tax is made...(ref: cenvat credit rules)

hope you are satisfied... post your replies...