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Expense

Provision for Expense

Expense Entry is passed if Bill or Invoice has been received from party

 

It is a routine Entry

Expense Dr

            To Party

 

 

Provision for expense is made at month end for those parties/vendors who do not submit their bills

It is a book closure entry like

Expense Dr

      To Provision for Expense

 

(Provision for expense is also called

Expense Payable)

Example

Telephone Bill from Airtel

Received of Rs 2500.Amount paid

by cheque

 

Entry 

When Bill Received

Telephone Exp Dr 2500

        To Airtel              2500

 

When Payment Made

Airtel                        2500

           To Bank                           2500

 

 

 

 

 

 

Example

At the month end, The Company estimated that telephone expense for the month is Rs2500,bill not yet received from Airtel

 

Entry

When Provision Made 

Telephone Exp 2500

                To Provision for Expense 2500

 

When Bill Received next month of Airtel of 2500

Provision for Exp       2500

            To Airtel              2500

 

When Payment Made of 2500

Airtel                        2500

           To Bank                        2500

 

Note:-

Instead of Provision for expense, some company’s use Ledger Telephone Expense Payable

 

Suppose Bill Received next month of Airtel of 2700

 

Provision for Exp    2500

Telephone Exp       200

        To Airtel                2700

 

When Payment Made

Airtel                        2700

      To Bank                           2700

 

Suppose Bill Received next month of Airtel of 2100 

Provision for Exp       2500

To Airtel                              2100

To Excess Provision Written off 400              

 

When Payment Made

Airtel                        2100

      To Bank                2100

 

 

 

  1. Accounts and Finance
  2. Step 3 Passing Book Closure Entries
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About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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