Whether to show VAT in the Trading & P & L Account?
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 June 2011
Dear Experts,
Kindly guide whether to show the VAT collected on sales along with sales and VAT paid on purchases along with the Purchases in the Trading Account. Eg. Sales Rs. 1000/- + VAT collected Rs. 50/- Total sales Rs. 1050/- and like wise for purchases.
I have come across some of the audit reports that gives this treatment and shows the VAT paid by challan in the Profit & Loss Account.
Whether this treatment is correct? Whether this method reflects the true amount of profit? Whether section 145A of the Income Tax Act gets affected?
Other treatment that is common is, not to show the VAT at all in the trading and profit & loss account and to show it directly as payable or receivable in Balance Sheet?
Kindly guide on both the methods and also suggest which is the appropriate method?
Kindly guide whether to show the VAT collected on sales along with sales and VAT paid on purchases along with the Purchases in the Trading Account. Eg. Sales Rs. 1000/- + VAT collected Rs. 50/- Total sales Rs. 1050/- and like wise for purchases.
I have come across some of the audit reports that gives this treatment and shows the VAT paid by challan in the Profit & Loss Account.
Whether this treatment is correct? Whether this method reflects the true amount of profit? Whether section 145A of the Income Tax Act gets affected?
Other treatment that is common is, not to show the VAT at all in the trading and profit & loss account and to show it directly as payable or receivable in Balance Sheet?
Kindly guide on both the methods and also suggest which is the appropriate method?
MJ Krishnamurthy
(Expert)
22 June 2011
In Trading a/c gross results of main activities ,such as gross value of purchases and sales or gross value of manufactured goods and sales are shown.This a/c is not inclusive of administrative expenses,tax accruals,and finance charges.Such expenses are always shown in P&L a/c only.
MJK
MJK
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