Provision for tax
This query is : Resolved
09 March 2009
I want to know what the provision for taxation is and why we make and treatment in accounts?
Manmohan ACA, CS
(Expert)
10 March 2009
Manmohan ACA, CS
(Expert)
10 March 2009
Provision for taxation (here in after called PFT) is a provision made for payment of tax.
A enterprise who liable to pay tax makes a provision at the end of financial on estimated basis.
moreover,as per income tax Act generally (i.e. is estimated tax is more then 5000) the enterprise also pays advance tax during the year.
In the assessment year when total tax payable if certainly known these three amount (a) total tax payable (b) provision made and (c) total advance tax paid till for the year is compared and adjusting entries is passed.
See
For creating provision
profit and loss A/c Dr
To PFT A/c
For payment of Advance tax
Advance tax A/c Dr.
To bank
When tax liability is finally decided
Step 1 PFT till made and tax liability is compared and balance transferred to P/L Appro.
Provision for tax A/c Dr. (PFT till made )
To P/L Appropriation (if tax liability > PFT)
To Income tax payable (total tax liability decided )
To P/L Appropriation (if tax liability advance tax ]
To Advance tax (advance tax till paid)
To Bank(if paid ) /outstanding income tax(is remain outstanding ) ( total tax liability decided < advance tax ]
Step1 and 2 can be merged
Provision for tax is shown as liability under current liability and provision
Advance
Provision for tax will appear as expenses in profit and loss account
For further detail leave query
A enterprise who liable to pay tax makes a provision at the end of financial on estimated basis.
moreover,as per income tax Act generally (i.e. is estimated tax is more then 5000) the enterprise also pays advance tax during the year.
In the assessment year when total tax payable if certainly known these three amount (a) total tax payable (b) provision made and (c) total advance tax paid till for the year is compared and adjusting entries is passed.
See
For creating provision
profit and loss A/c Dr
To PFT A/c
For payment of Advance tax
Advance tax A/c Dr.
To bank
When tax liability is finally decided
Step 1 PFT till made and tax liability is compared and balance transferred to P/L Appro.
Provision for tax A/c Dr. (PFT till made )
To P/L Appropriation (if tax liability > PFT)
To Income tax payable (total tax liability decided )
To P/L Appropriation (if tax liability advance tax ]
To Advance tax (advance tax till paid)
To Bank(if paid ) /outstanding income tax(is remain outstanding ) ( total tax liability decided < advance tax ]
Step1 and 2 can be merged
Provision for tax is shown as liability under current liability and provision
Advance
Provision for tax will appear as expenses in profit and loss account
For further detail leave query
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Depreciation Chart Companies Act
- GST Audit whether Govt Companies are exempt?
- PTRC Show Cause Notice on Email
- Capital Gail Exemption Certificate
- Unable to File TDS Q2 Return – New TRACES Portal Error
- Transfer of Physical Stock Between Two Proprietorship Concerns
- EPF ECR NEW RULES Sep 17th 2026
- Issuing of delivery challan by seller of goods
- Taxation of crypto futures in India Fy 2026- 2027
- Not ordinarily resident having partnership income in India and salary in USA is any form to filed be
- Accounting treatment of AMC alongwith the purchase of Laptop
- GST Treatment of Purchases with GST Paid where Outward Supplies of Manufactured CattleFeed Exempt
- Expert Help Required for TDS Refund 100000 Through TRACES – AY 2022–23
- IMPORT PURCHASE ENTRY PASSED IN BOOKS OF ACCOUNT
- FAST DS 26 Undisclosed Foreign Asset Disclosure Scheme 2026
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
