Is it correct entry?
This query is : Resolved
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.
To provision for taxation
is correct entry to pass books of accounts in the case of company.
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.
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.
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.
Tax provisions are always created out of the annual profit, not previously accumulated reserves.
19 September 2025
Good Luck...
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