1. Purchases : In some instances, invoices relating to purchases of goods that have been taken into stock are received too late to be included in the Purchase Day Book of the closing month. As a result, those will be included in the accounts of the succeeding period. In such a case, a schedule of such invoices should be prepared and their total debited to Purchases Account and carried down as an outstanding liability. If the precise amount of liability on account of such purchases cannot be ascertained, an estimate made a responsible official might be accepted.

2. Wages, Salaries, etc., : The amounts debited to these accounts should represent the amount actually chargeable for the year. Thus, if the amount payable at the close of the year has been paid in the succeeding period, a provision therefor should be made. While doing so, it should also be verified that the corresponding provision made at the end of the previous year has been brought in as a credit, for arriving at the amount chargeable for the year.

3. Rent and Taxes : The amount charged towards the rent should be the annual rent as provided for in the lease. If any rent for the year was outstanding at the close of year or has been paid in advance, the amount outstanding or paid in advance should be adjusted as a liability or asset respectively. Municipal taxes usually are payable in advance. As a result a proportion of last payment is usually carried forward as unexpired to the next period. By scanning the account, it should be ascertained that the charge only for the full has been included in the account.

4. Directors’ and Managing Directors’ Fees or Salaries : It should be verified that after making necessary provisions for account outstanding the total amount debitable to the account agrees with the resolution of the Board of Directors or shareholders under which the payments have been paid at the rates authorised the articles in respect of meeting attended the Directors and it should be noted that the working directors of a public company are not expected to receive any such fee pursuant to the guidelines issued the Company Law Board.

5. Freight : Carriage and freight account may not be rendered till some time after the period to which they relate. In such a case a provision for the amount outstanding may be made on an estimate and while doing so the amount provided in the earlier year may be taken into account.

6. General Expenses : Entries in the various accounts should be carefully examined and analysed to make certain that no item has been debited in this account which should have gone elsewhere. Quite often, donations and subscriptions, bank charges, conveyance and other petty expenses are included under this head. Wherever possible, the use of such omnibus account for these debits should be avoided and, in any event, where the total of items in any individual class of transactions is considerable to warrant a separate account being opened for it, the same should be segregated and recorded in a separate account. When this is not possible, as a precaution an analysis of the account should be prepared at the end of the year and the total under the various headings compared with the corresponding totals in the previous period. Part II of Schedule VI to Companies Act, 1956, requires that every company must show under distinct heads the expenses that exceed 1% of the total revenue of the company or Rs. 5,000 whichever is higher. Henceforth, it would be improper to include any such expense under the heading “miscellaneous expenses” or “general expenses”.

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