Statutory liability

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vinay (Querist)
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01 September 2017 Please tell,
May i issue a check against tds liability of march . and liability not shown in the balance sheet.

may i do this?

CA ALOK KUMAR

CA ALOK KUMAR (Expert)
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02 September 2017 Kindly explain it clearly. You may refer www.wealth4india.com

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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25 July 2025 Good question! Here’s a quick answer on **issuing a cheque against TDS liability not shown in the Balance Sheet**:

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### Can you issue a cheque against TDS liability of March if it's not shown in the Balance Sheet?

**Technically, no.**

* The liability should be **recognized and shown in the Balance Sheet** as a current liability (e.g., "TDS Payable" or "Statutory Dues Payable").
* If the TDS liability existed as on the Balance Sheet date (March 31), but is not recorded, it means the financial statements are **not presenting a true and fair view**.
* Issuing a cheque without recognizing the liability violates the **matching principle** and **accounting standards** (AS 1 – Disclosure of Accounting Policies, and AS 29 – Provisions, Contingent Liabilities, and Contingent Assets).

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### Proper treatment:

* Before issuing payment, you must **accrue the liability** by making the entry:
`TDS Expense/Expense Account Dr`
`TDS Payable (Liability) Cr`

* This way, liability appears in the Balance Sheet, and payment reduces that liability.

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### Summary:

| Situation | Can you issue cheque? | Notes |
| -------------------------------- | --------------------- | ----------------------------------------------------------- |
| Liability shown in Balance Sheet | Yes | Proper accounting treatment |
| Liability **not shown** in B/S | No | This distorts financials and violates accounting principles |

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**If you issue payment without recording liability, you understate liabilities and expenses — this is not advisable.**

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Would you like me to help draft the correct journal entries for TDS liability?

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