Situation:- e.g. We are excisable unit and we take Input Cenvat credit of the service tax. We want to make provision for the Telephone bill of the March received in April, Bill Amt is Rs. 10,000 Plus Service Tax Rs.1000 so Total Bill Amount is Rs.11000(10000+1000).
Below mentioned are two alternative solution of recording Provision of Telephone bill, which is the correct Method of recording provision in the book of account as on 31/03/09
Alternative 1:- We create Provision of Rs.10000 for the year 2008-09 exclusive of servive tax as service tax is not our expenses, because we will avail cenvat credit in April(New a/cing Year)
Alternative 2:- We pass the entry as follows Debit[ Telephone Expns Rs.10000, Sevice tax Receivable(Under Current Assets) Rs.1000] Credit provision of telephone expns Rs.11000
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