09 April 2016
profit & loss (cr) - Rs. 2000 is appearing in the trial balance Addl info: P&L balance has been arrived after charging Rs. 5000 on account of short provision for taxation for the earlier year. Provide for income tax for current year of Rs. 65000. Profit before tax for current year - 150000 Less: provision for tax (65000) Short provision for tax in py (5000) profit for the period - 80000 What is this short provision for py and why is this deducted from currrent year profits?
09 April 2016
short provision of previous year means the actual tax for the previous year paid in current year is more than the provision of tax done in previous year. and being it expense it should be written off in profit and loss a/c and we will show is as previous year expense / provision charged to current year.
09 April 2016
Provision for tax is made based on working by company side. During assessment the IT dept make some dis allowances leading to requirement of higher tax payment which is the reason for short provision. Such short provision in the earlier years after assessment will be deducted/adjusted from current year profits,
09 April 2016
Like. If the tax liability for the PY is 150,000 but provision was made for only 100,000.So we debit provision of Rs. 100000 to py p&l and short provision of Rs. 50000 for current year? Is that right?
09 April 2016
Thanks alot for helping me with sir! finally could you give me journal entries in this regard. Like those to be passed in previous year and in current year
CAclubindia
