Answers!
Journal Entry :
Advertisement Exp (Current Year) A/c Dr. Rs. 20,000
Advertisement Exp. (Prepaid Exp) A/c Dr. Rs. XXXXX
To Cash / Bank A/c Rs. 20,000
(Being advertisement expenses incurded)
Important point to consider during this transaction :
- Amount involved is Rs. 20,000. Hence to get deduction under Income Tax act 1961, payment shall be made in account payee cheque. Cash payment won't allow you deduction under Act.
- Matching Concept is to be applied when passing. Only that much expenses should be recorded for current financial year for which corresponding benefits are derived.
- Advertisement Expenses (Prepaid) is that portion benefits of which will be derived in next financial year(s).
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Answer the question...
Journal Entry :
Advertisement Exp (Current Year) A/c Dr. Rs. 20,000
Advertisement Exp. (Prepaid Exp) A/c Dr. Rs. XXXXX
To Cash / Bank A/c Rs. 20,000
(Being advertisement expenses incurded)
Important point to consider during this transaction :
- Amount involved is Rs. 20,000. Hence to get deduction under Income Tax act 1961, payment shall be made in account payee cheque. Cash payment won't allow you deduction under Act.
- Matching Concept is to be applied when passing. Only that much expenses should be recorded for current financial year for which corresponding benefits are derived.
- Advertisement Expenses (Prepaid) is that portion benefits of which will be derived in next financial year(s).
Comment