Accountants of Vaibhav Ltd. showed a net profit of ₹ 9,50,000 for the second quarter of 2026 after incorporating the following: (i) Bad debts of ₹…

As per AS 25 "Interim Financial Reporting," the quarterly income of Vaibhav Ltd. has not been correctly stated. It needs to be adjusted as follows: (i) Bad debts: Bad debts of ₹ 60,000 have been incurred during the current quarter. As per AS 25, an expense that is recognised should be based on the best estimate of the item as it relates to that period — such expenses cannot be arbitrarily deferred to a future quarter merely as a matter of convenience or expectation of recovery, unless it meets the definition of a cost genuinely relating to a later period. Since the entire ₹ 60,000 pertains to the current quarter, the deferral of 60% (i.e., ₹ 36,000) is incorrect. This ₹ 36,000 should be added back (i.e., recognised as an expense of the current quarter, reducing profit further is not required since it was already deferred out — so it must be deducted from profit as an additional expense). Hence ₹ 36,000 to be deducted from ₹ 9,50,000 (since it was wrongly excluded/deferred and must now be charged to this quarter). (ii) Extraordinary loss: The extraordinary loss of ₹ 50,000 has been correctly recognised in full in the quarter in which it was incurred, in line with AS 25 (extraordinary/non-recurring items are recognised in the period in which they occur and are not spread over the year). No adjustment required. (iii) Additional depreciation: Recognising the entire additional depreciation of ₹ 30,000 arising from the change in method, in the quarter in which the change was made, is in line with AS 25. No adjustment required. (iv) The entire ₹ 80,000 must be expensed fully in the quarter in which it is incurred (Q2). The company's original treatment was correct, and no adjustment is required. Revised Computation of Correct Quarterly Income: Particulars Amount (₹ ) Net profit as reported 9,50,000 Less: Bad debts wrongly deferred, now to be charged in full to this quarter (60% of ₹ 60,000) (36,000) Extraordinary loss — correctly recognised, no adjustment — Additional depreciation — correctly recognised, no adjustment — Planned major repair — correctly expensed in full, no adjustment — Correct quarterly income for Q2 2026 9,14,000 Conclusion: Vaibhav Ltd. should report the correct quarterly income of ₹ 9,14,000 (₹ 9,50,000 – ₹ 36,000) for the second quarter of 2026, as per AS 25.