Prior period expense

[Guest]

Dear Sir,

Please explain which type of expenses can be booked as prior period expenses.

How can done accounting??

Any audit points?

Thanks & Regards,

Sanjay Vasava

[DR.MARIAPPAN GOVINDARAJAN]

Normally prior period expenses are booked for which already there is no provision has been made. The prior period expenses are booked in the Profit & Loss Adjustment account if it exceeds ₹ 5 lakhs. If it is below it is used to book it for current year expenditure.

[Guest]

Dear Sir,

Service tax credit availability on prior period expense. Please suggest.

Thanks & Regards,

Sanjay Vasava

[DR.MARIAPPAN GOVINDARAJAN]

First you have to consider the provisions of point of taxation. Then you have to consider the time limit for taking the credit.

[Ganeshan Kalyani]

The provision states that the credit shall be taken within one year from the date of invoice. Hence if the prior period expense is booked against the provison of previous year then also credit would be allowed if the invoice is less than one year old.

[Guest]

Dear Sir,

Service provider raised the invoice and mentioned current month date but service period has mentioned feb - 2016. In this case I booked an invoice in respective heads as prior period expense. But I need clearity, we can avail service tax credit or not.

Thanks

Sanjay Vasava

[Ganeshan Kalyani]

Yes, you can take the credit.

[YAGAY andSUN]

CENVAT credit can be availed within one year from the date of issuance of an Invoice.

[Ganeshan Kalyani]

I am also of the same views as expressed by learned experts.

AI Summary

Clarification on Prior Period Expenses: Record Over 5 Lakhs Separately; Service Tax Credit Within One Year of Invoice. A discussion on accounting for prior period expenses and the availability of service tax credit. A user inquires about the classification and accounting treatment of prior period expenses and whether service tax credit is applicable. Responses clarify that prior period expenses are recorded in the Profit & Loss Adjustment account if they exceed 5 lakhs; otherwise, they are treated as current year expenses. Service tax credit can be claimed within one year from the invoice date, even if the service period is from a prior year, provided the invoice is less than a year old.