Is it correct entry?

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The correct accounting entry to create a provision for taxation in a company's books is to debit the Profit and Loss Account and credit the Provision for Taxation Account. The entry 'Reserve and Surplus A/c Dr To Provision for taxation' is incorrect because tax provisions should be created from the current year's profits, reflecting an expense in the P&L, not from accumulated reserves.

Daya

Daya (Querist)

16 September 2025 Reserve and surplus A/c Dr
To provision for taxation
is correct entry to pass books of accounts in the case of company.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

16 September 2025 The correct accounting entry to create a provision for taxation in the books of a company is:

Profit and Loss A/c Dr.
To Provision for Taxation A/c

The entry "Reserve and Surplus A/c Dr To Provision for taxation" is incorrect. The provision for tax should be created from the profits of the year and reflected as an expense in the Profit and Loss account, not from reserves and surplus. When the provision is made, the Profit and Loss account is debited (showing the expense) and the Provision for Taxation (a liability) is credited.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

16 September 2025 Reserves and Surplus reflect accumulated profits and should not be debited for annual tax provisions.

Tax provisions are always created out of the annual profit, not previously accumulated reserves.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

19 September 2025 Good Luck...

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