entries of advance tax & prov for tax

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Querist : Anonymous

Querist : Anonymous (Querist)

09 June 2011 In my firm for the F.Y. 09-10, i had paid advance tax of Rs. 60000 in dec'09, but at thr year end my tax liabiity comes out to Rs. 55000, TDs deducted by others on my income is RS. 20000, so at the year end position was that tax liability was Rs.55000, and tax to be adjusted against it was Rs. 80000(60000+20000), now i recd the refund of Rs. 25000, what will be the accounting entry??In my b/s advance tax and TDs are standing in the loans and advances side. No provision a/c was created as there was no liability. Please explain me the accounting entry.

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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09 June 2011 Bank Dr. .....25000/-
Provision for Tax Dr.......55000/-

To Advance Tax Cr.......60000/-
To TDS recoverable Cr.......20000/-

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Querist : Anonymous

Querist : Anonymous (Querist)

09 June 2011 but how can i debit my provision for tax account??as i had not made any entry in that account in 2008-09??so prov for tax will have a db. bal??hw i will close that account??

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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09 June 2011 Have you not created a provision of 55000/- tax liability , last year ???

Querist : Anonymous

Querist : Anonymous (Querist)

09 June 2011 ya we had not credited as at that time there was no need to create any provision for tax as advance tax was already paid which was more than the tax liability??

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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09 June 2011 See.. last year you must have a entry :

Advance tax : Dr.....60000/-
To Bank.....................Cr.........60000/

TDS Recoverable : Dr....20000/-
To Party Cr. 20000/-

So you are saying that ... there is no more entry last year apart from the above two.

is it so ???

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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09 June 2011 If yes...then

Bank Dr. .....25000/-
Income tax paid Dr.......55000/-

To Advance Tax Cr.......60000/-
To TDS recoverable Cr.......20000/-

Querist : Anonymous

Querist : Anonymous (Querist)

09 June 2011 ya....we had two entries only...

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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09 June 2011 Bank Dr. .....25000/-
Income tax paid Dr.......55000/-

To Advance Tax Cr.......60000/-
To TDS recoverable Cr.......20000/-

Income tax paid account will be simply treated as an appropriation.

Querist : Anonymous

Querist : Anonymous (Querist)

09 June 2011 ok thank u very much sir....and that income tax paid account will be P & L item??or it will have a group of provision??

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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09 June 2011 It will be a PL item but it will not be treated as an expense. So while calculating the current years tax liability, this figure will be added back.

Querist : Anonymous

Querist : Anonymous (Querist)

09 June 2011 ok...thanks a lot...

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