18 April 2015
Dear Experts, My query is as below: On recognition of income after it meets recognition criteria, the entry was:
Bank A/c Dr. TDS Receivable Dr. To Income A/c Cr
Now as the service could not be performed, refund in full is being made. Now my query is what should be the entry in this case as the TDS receivable has already been deposited with govt. which will be shown as credit in 26 AS and would be received on refund of income tax paid by the department. So TDS receivable cannot be credited, if this is the case, what should be the appropriate accounting entries.
18 April 2015
The entry is Income a/c Dr to bank a/c Cr
only, no need to pass any entry for TDS. As TDS made is deposited and lying credit in your ac. Adjustment entry for TDS will arise when it is adjusted against tax payable or when refund is received.
28 April 2015
Dear Seetharaman Sir, if we put the entry as you are advising, then full amount of income recognized/advance received would not be reversed and still a balance of amount deducted as TDS would be shown as income/advance.
I am using the word advance to mitigate any confusion regarding income recognition view.
I have discussed with some people who advised only one option available with following example: Rs 100 being income, Rs 10 deducted as TDS, net Rs 90/- received in bank
1. Inital Entry would Bank Dr 90 TDS Dr 10 To Income/advance A/c Cr.100
2. One cancellation/refund Income/advance A/c Dr. 100 To Party A/c Cr 10 To Bank Cr 90 (we should not pay more than what we had received initially)
The current liability should be booked in party name as the TDS credit that we would receive is something we are not entitled to, as the transaction was reversed in finality and the tax was paid by the party not by the entity directly on its own account. Therefore, the final transactions would be as below:
3. On receipt of refund/adjustment with tax payable Bank/Tax Payable A/c Dr 10 To TDS Receivable A/c Cr 10
4. Payment to the party for TDS depsoited by him
Party A/c Dr 10 To Bank A/c 10
I might have skipped some entries, please correct me if I am wrong.
CAclubindia
