Provision of income tax
This query is : Resolved
03 September 2012
A company Created Provision of tax of Rs.5000 for F.Y 2010-11 and TDS for the same yr is Rs 10000 and tax payable is Rs. 7500 and in F.Y 2011-12 company got refund of Rs 2500 and still provision for tax of Rs. 5000 is showing in balance sheet in Current FY. so, I am not getting how should we treat it in Current FY if the profit in current FY is Rs.4500??
Experts please reply
Experts please reply
03 September 2012
you need to pass the adjustment entries
Dr: Provision for Income tax Rs.5000
Dr: Income tax for fy-10-11 Rs.2500
Dr: Income tax refund receivable Rs.2500
Cr: TDS income tax receivable Rs.10000
while receipt for refund
Dr: Bank Rs.2500
Cr: TDS receivable Rs.2500
while doing his adjustment current year profit will be adjusted Rs.2500 due to short provision of Income tax last year (7500-5000)
Dr: Provision for Income tax Rs.5000
Dr: Income tax for fy-10-11 Rs.2500
Dr: Income tax refund receivable Rs.2500
Cr: TDS income tax receivable Rs.10000
while receipt for refund
Dr: Bank Rs.2500
Cr: TDS receivable Rs.2500
while doing his adjustment current year profit will be adjusted Rs.2500 due to short provision of Income tax last year (7500-5000)
03 September 2012
so, it means last year's provision would not be shown in current year??
03 September 2012
You have already balance of Rs.5000 as provision for Income tax in your liability side, need to adjust the same. dont show again same Rs.5000 in current year also.
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03 September 2012
But sir while i was preparing a audit report there was a same situation bt they didnt adjust the last yr provision and has b/f the same amount to present year, so wat shld i do in dis situatn??
03 September 2012
you can suggest your client to pass the entry and adjust the same in the current year books.
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03 September 2012
thanks Ramesh Krishnan sir for solving my
query.
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