17 February 2011
There are two ways to do the accounting;
First way (generally followed by most); At the time of advance tax payment booked it under current assets. For provision of income tax make the entry & show income tax payable under current liabilities.
After the assessment by the income tax department knock off the assets against liabilities.
Second way; At the time of advance tax payment booked it under provision for taxation under current liabilities, this account will show debit balance through out the year. For provision of income tax make the entry & credit the Provision for taxation account under current liabilities.
After the assessment by the income tax department you don't need to adjust anything in the balance sheet.
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