What is joournal entry for invcome tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 September 2012 CAN YOU DO EXPLAIN WHAT IS JOURNAL ENTRY FOR INCOME TAX PAID IF I PAID RS 10000 TAX FOR FINANCIAL YEAR 2010-11 ON 2011-12...

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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21 September 2012 Entry has to be pass in the f.y 2011-12 i.e in the year of payment. It is personal expenditure and doesn't allowed as expenditure under income tax act. so debit to capital account and credit to bank/cash a/c the entry is.......

Capital a/c dr 10000
To Cash/Bank a/c 10000
(Being self assessment tax paid for the A.Y.2011-12 vide chalana no: through Bank name (or) internet banking (or) etc..)

Alternatively you can create the income account then the entry is .......

Income tax a/c dr 10000
To Cash/Bank a/c 10000
(same as above)

Note: income tax a/c can be grouped under current assets and at the end of the year it would be transfer to capital account or it can be grouped under capital account or it can be grouped and expenditure account and written off to P&L account and at the time of the computation of total income for tax purpose disallow it as personal expenditure to arrive the profit as per income tax account in your statement of total income.

But my view is first entry is correct(i.e debiting to capital a/c) because it is more clear and also gives correct profit in the P&L a/c at any time.

OM SAI SRI SAI JAI JAI SAI

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