Prof tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 August 2014 SIR
1.IN A WINES BUSINESS BREWERIES CO.LTD DEDUCTED Rs.2500 AS PROF TAX FOR THE WINES FIRM.2.AND FOR THE WINE SHOP BREWERIES CO. TENDERED THE SHOP FOR 42LAKHS ,HOW TO ACCOUNT THE TENDER CHALLAN PAID .HOW TO ADD PROF TAX AND TENDER CHALLAN AMOUNT COMES UNDER WHICH GROUP AND WHERE IT TO BE SHOWN IN BALANCE SHEET

PLEASE GIVE YOUR VALUABLE SUGGESTION
THANK YOU
Sir please answer

Querist : Anonymous

Querist : Anonymous (Querist)

20 August 2014 Please answer my doubt

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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10 August 2024 Here’s a detailed guide on how to handle the accounting for Professional Tax and Tender Challan in your books:

### 1. **Accounting for Professional Tax**

**Professional Tax** is a tax levied by state governments in India on professions, trades, and employments. It is generally deducted at source by the employer and paid to the state government.

#### **Journal Entries for Professional Tax:**

When the professional tax is deducted from employees:
```plaintext
Professional Tax Expense Account Dr. 2500
To Professional Tax Payable Account 2500
```
This entry records the deduction of professional tax as an expense and the corresponding liability.

When the professional tax is paid to the government:
```plaintext
Professional Tax Payable Account Dr. 2500
To Bank Account 2500
```
This entry reflects the payment of the professional tax to the government.

#### **Balance Sheet Impact:**

In the balance sheet:
- **Professional Tax Payable Account** will appear under **Current Liabilities** if it is unpaid.
- **Professional Tax Expense Account** will be included in the **Profit and Loss Account** under operating expenses.

### 2. **Accounting for Tender Challan**

**Tender Challan** relates to payments made for participating in a tender process, such as a lease or contract for property. Here’s how to account for it:

#### **Journal Entries for Tender Challan:**

When paying the tender challan:
```plaintext
Tender Expense Account Dr. 42,00,000
To Bank Account 42,00,000
```
This entry records the payment made for the tender.

If the tender amount is paid to secure the right to lease or rent property, it should be treated as an **Intangible Asset** or **Prepaid Expense** until the lease or contract is finalized.

#### **Balance Sheet Impact:**

If the tender amount is a prepayment for future benefits, it will be recorded as an **Intangible Asset** or **Prepaid Expense** on the balance sheet under **Current Assets** (if applicable within one year) or **Non-Current Assets** (if it’s expected to provide benefit over a longer period).

### **Summary of Accounting Entries:**

1. **Professional Tax:**
- **Expense**: Recorded in the **Profit and Loss Account**.
- **Liability**: Recorded under **Current Liabilities** in the **Balance Sheet** if unpaid.

2. **Tender Challan:**
- **Expense or Asset**: Recorded under **Intangible Assets** or **Prepaid Expenses** on the **Balance Sheet** if it relates to future benefits or contracts.

### **Where to Show in Balance Sheet:**

- **Professional Tax**: As a liability if unpaid, or as an expense in the Profit and Loss account.
- **Tender Challan**: As a prepayment or intangible asset if it relates to future benefits, or directly as an expense if it is an immediate cost without future benefits.

### **Example Balance Sheet Presentation:**

**Balance Sheet (Simplified)**

**Current Liabilities:**
- Professional Tax Payable: Rs. 2500

**Non-Current Assets (if applicable):**
- Tender Challan (as Intangible Asset): Rs. 42,00,000

**Profit and Loss Account:**
- Professional Tax Expense: Rs. 2500

**Notes to Accounts:**
- Detail of Tender Challan and its nature (prepayment, intangible asset, etc.).

Always ensure that you adhere to the specific accounting standards and practices relevant to your jurisdiction and business operations. If necessary, consult with a professional accountant for tailored advice.

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