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| Corporate Accounting Treatment |
Accounting treatment for gas bill or utility bill -With Practical Example:
Gas bills and utility expenses are key considerations for businesses operating in commercial spaces. Here’s an in-depth look at their importance:
1.Operational Necessity:
For many commercial establishments, gas is an essential resource for heating, running equipment, and other processes critical to daily operations. In colder climates, gas is vital for space heating, ensuring comfort for employees and customers. For industries such as restaurants or manufacturing, gas fuels cooking, production equipment, or even specialized machinery.
2.Cost Management and Cash Flow:
Utility expenses, including gas bills, represent a significant part of the operational costs for commercial entities. Businesses must manage these expenses carefully to maintain profitability and liquidity. These costs are typically ongoing, which means they need to be forecasted and budgeted. Any inefficiencies or unexpected increases in gas bills can impact cash flow, disrupting financial planning.
3.Energy Efficiency:
Rising gas prices can prompt businesses to implement energy-saving measures. Efficient gas usage, whether by improving insulation or installing energy-efficient systems, can lower utility bills and improve profit margins. These measures are not only financially beneficial but also environmentally responsible, reducing the carbon footprint of the business.
4. Contractual Obligations:
In many commercial leases, utility costs such as gas may either be included in the rent or paid directly by the tenant. Clear understanding of these terms is crucial because utility costs can fluctuate based on market rates or seasonal changes, potentially affecting overall occupancy costs. Businesses may negotiate to either lock in rates or ensure they can pass on some of these expenses.
5.Tax Deductions:
In most jurisdictions, utility expenses, including gas, can be tax-deductible as part of business expenses. Proper accounting of gas usage is necessary for businesses to claim these deductions, making utility expenses a key component of overall tax planning.
6. Sustainability and Corporate Social Responsibility (CSR):
Businesses are increasingly focused on sustainability and reducing their environmental impact. Managing gas usage efficiently can be part of a broader CSR strategy, showing that a company is committed to reducing waste and greenhouse gas emissions. Some businesses even invest in renewable alternatives or carbon offsetting to improve their environmental credentials, which can improve public perception and attract eco-conscious customers.
7.Regulatory Compliance:
In some regions, businesses must comply with regulations regarding energy usage, which may include gas consumption limits or energy-efficiency standards. Failure to manage gas usage properly could result in fines or penalties, making careful monitoring of these expenses essential for legal compliance.
In Finally:
For commercial places, managing gas bills and utility expenses is critical for maintaining operational efficiency, controlling costs, achieving sustainability goals, and ensuring regulatory compliance. Effective management of gas usage contributes to a company's bottom line and overall financial health, making it a vital aspect of business operations.
When a company pays a gas bill, it is treated as a utility expense and recorded accordingly in the accounts. Here's how the accounting entry looks:
Here is the demo sheet for better understanding the reader below
Practical Example-(Demo sheet):
The ABC Company PVT. LTD. A 100% Export oriented Textiles manufacturing group of company, they usually produce Yarn by passing several process like –Blow room, Drawing, Carding & finishing. In the Month of July-2024 they received Utility bill (Gas bill) from Titas Gas Transmission & distribution co Ltd. They Provide us following information includes-
1.Issue date.08.08.2024
2.last payment date.27.08.2024.
3.Invoice no. 80-5262425,
4.Billing period from (30. June-2024 to 29. July-2024)
5.Per Cubic meter Rate@27.39
The summary of gas bill is mention below-
|
Date |
Meter no |
Previous(Read) |
Current |
difference |
Different(Cubic mtr) |
Bill consume |
Tariff |
|
08.08.2024 |
835060 |
50,50,500 |
5355500 |
305000 |
305000 |
305000 |
27.39 |
Table for calculation of gas bill:
|
Particular |
Amount (TK) |
Remarks |
|
Sales Amount (Including. VAT) |
83,53,950 |
(305000*27.39)= 83,53,950 |
|
Demand charge |
58500 |
0.6252% of Total Amount |
|
VAT |
000.00 |
Exempted as 100% Export oriented |
|
RSMS/CMS RENT |
4550 |
|
|
Total Adjustment: |
000.00 |
|
|
Total bill (excluding surcharge) |
84,17,000 |
|
|
Add:Surcharge@12%(PA) |
94,675 |
Note-01 (Below) |
|
Current Bill Amount(including charge) |
85,27,500 |
Paid only Titas Gas co. |
|
Advance Income Tax(AIT)(2%)*** |
1,70,550 |
***(85,27,500*2%)=1,70,550 |
|
Arrear as on 11.08.2024 |
78,50,500 |
|
|
Last payment bill Amount |
68,95,500 |
|
|
|
|
|
Note:01
Surcharge
Total bill (excluding surcharge) (Tk.83,53,950+58,500+4,550)
= TK.84,17,000
Add: Delay charge: = Tk.10,50,500(if)
Total amount applicable for surcharge = Tk.94,67,500
So surcharge (12%/12) ={Tk.94,67,500@1%} = Tk.94,675
1.Provisional Journal Entry for Gas bill below-
|
Date |
Particulars |
Debit |
Credit |
|
31.07.2024 |
Gas bill |
85,27,500 |
|
|
|
Provision for gas bill |
|
85,27,500 |
Narration:
Provision for gas bill for the month of July 2024(supply of gas 305000 cubic meter@ tk.27.39 & Demand charge, Surcharge, RMs Rent). Bill no.4211098 dt.08.08.2024(last payment date-27.08.2024)
2.Government challan @2% deduction Journal Entry below-
|
Date |
Particulars |
Debit |
Credit |
|
19.08.2024 |
Provision for gas bill |
1,70,550 |
|
|
|
Titas & gas T & D Ltd. AIT deduction |
|
1,70,550 |
Narration:
AIT 2% against gas bill Govt. Challan A/C No. for the month of july-2024. Bill no.4211098 dt.08.08.2024(last payment date-27.08.2024)
Before payment we generally Request to "Bank" for payment of gas bill for the respective month through request letter as follows:
Date:30.09.2024
To
The manager
ABC Bank Ltd.
Foreign exchange Branch
Dhaka-1200
Sub:Request for payment of gas bill for the month of July-2024
Dear sir,
We are requesting, to please make the gas bill payment for the month of July-2024 for Tk. 85,27,500/= (Eighty five lac twenty seven thousand five hundred) only in favor of Titas gas Transmission & distribution co.Ltd by debiting our CD-A/C=400511100005860 A/C- Name ABC company ltd. Source tax amount of TK. 1,70,550/=(One lac seventy thousand five hundred fifty ) only has been paid through Government Treasury Challan (copy enclose).
Your prompt action regarding the above will be highly appreciated.
Thank you
Vice Chairman
Finally, bank disbursement the payment of gas bill (BV)journal entry-is
3.Bank payment journal entry- for actual payment of gas bill for the month of july-2024.
|
Date |
Particulars |
Debit |
Credit |
|
19.08.2024 |
Provision for gas bill |
85,27,500 |
|
|
|
Social Islamic Bank ltd.CD-5860 |
|
85,27,500 |
Narration:
To record actual payment of gas bill after (AIT deduction @2%) for the month of july2024. Bill no.4211098 dt.08.08.2024