What is Audit Fees In Accounting - Meaning And Journal Entry

It is a fees paid to chartered firms by the company for auditing the Books of Accounts, Financial Statements of the company for the accounting period in order to verify financial statements that should give reliable, true & fair view of financial statements to the Users of Financial Statements / Information.

Audit Fees Journal Entry

When it is paid to Qualified Chartered Firms or Auditors for checking books of accounts alongwith financial statements for the accounting periods, then following Journal Entry is recorded in the Journal of the company as shown below:

                                                    Audit Fees a/c  XXX

                                                                          Cash a/c / Bank a/c  XXX

                                                        (Audit Fees Paid For Cash / Bank)

 

When audit fees paid by cheque but the cheque / check is not deposited into bank, then we debit Audit Fees Account and Credit Cash Account. but if it deposited into bank, then we credit bank account instead of cash account.

Audit Fees is not treated as operating expense rather than it is recorded in Income Statement under the section of General & Administrative Expenses.

Sometimes, the qualified audit firms conduct the audit work but yet the company is not paid to audit firms at the end of the accounting period, in that Accrued Audit Fees is created and now it becomes a Current Liability for the company to pay to the firms who delivered its services on time. So, the company should record the following Adjusting Entry to record accrued audit fees to show it on balance sheet as shown below:

                                                        Audit Fees a/c  XXX

                                                                              Accrued Audit Fees a/c  XXX

                                   (Audit Fees Accrued or Payable for the Accounting Period)