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?
10 March 2009
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
- TDS on land property purchase Form-141 related query
- TDS Return processing
- Concept of Vendor and customner reconciliation
- Mistake in e-invoice identified after 24 hours
- EXPORT PAYMENT
- NRI ITR2 account in 2025-26.
- Query regarding reporting of exempt foreign remuneration in ITR (AY 2026-27)
- FEMA/RBI treatment — Amazon.ca arbitrage (US buy, Canada sell, goods never enter India)
- Goods return by customer
- INWARD REMITTANCE FOREIGN
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
