Provision for income tax

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rajesh (Querist)
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15 June 2010 I have one client which is a ltd. company. Suppose it has made provision for taxes for the year 2007-08 Rs. 150000/-. And the actual tax liability comes in the assessment of this company is Rs. 125000. So Rs. 25000/- is refunded by IT department with interest. Now the problem is what accounting entry is to be passed for Rs. 25000/- which is a excess provision? Whether it should be debited to provision for taxes account or it should be taken as income.

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CA Sanat Pyne

CA Sanat Pyne (Expert)
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15 June 2010 Entry will be
Prov for it...........Dr 25000
To, Reserve & surplus 25000
Bank A/c ............Dr 25000
Provsion for it......Dr 125000
To, Advance tax 150000

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