Provision of income tax

This query is : Resolved

Manisha Garg (Querist)
Follow

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

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
Follow

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)

Manisha Garg

Manisha Garg (Querist)
Follow

03 September 2012 so, it means last year's provision would not be shown in current year??

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
Follow

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.

Message likes : 1 times

Manisha Garg

Manisha Garg (Querist)
Follow

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??

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
Follow

03 September 2012 you can suggest your client to pass the entry and adjust the same in the current year books.

Message likes : 1 times

Manisha Garg

Manisha Garg (Querist)
Follow

03 September 2012 thanks Ramesh Krishnan sir for solving my
query.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now