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At the year end 31 December 2001, Amit estimated that 950$ was owing for the 3 month to 31 December 2001. He had however not received a bill from the telephone company.
question: if he have not received a bill should we include it in this year?
p&l dr
bill payable crthis is according to prudence , matching concepts..
record the expense in the year with which it relates..yes if it relates but he doesn’t know exactly how much is the expense.
he only thinks that it is 950$.
if it was fixed expense and he knew it for sure yes but…- Topics: 0
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Recognise a liability (bill payable) and an expense (p n’ l) in this year’s final accounts in compliance with a matching concept (revenue must be matched with the expenses incured 2generate those revenues)
@joseph89 said:
yes if it relates but he doesn’t know exactly how much is the expense.
he only thinks that it is 950$.
if it was fixed expense and he knew it for sure yes but…in other words, he knows that there is a present liability in respect of telephone services which he used in his business. in fact, in each telephone calling we make a liability but it’s not recorded in accounts due to its low materiality, actually it’s delayed to aggregate for a material period, for example 2 months. however, it’s important to recognise this expense in year end, so we can not wait for receiving the bill in next year. this is based on completeness as a qualitative characteristic. however in these cases we should estimate the figure of the present liability, please pay attention, this estimating doesn’t have a significant uncertainty because it could be calculated based on the past received bills.
i hope you got what i tried to say
good luck
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