Hi Frndzz!!!!
I have a query regarding Accounting Treatment of Income Tax in case of Partnership Firms
Is There any requirement to make provision for income tax as in case of Corporates or to directlty debit the Partner's Capital A/cs.
Moreover what is the accounting treatment of Demands raised during assessments (Sales tax and Income Tax) where there is no payable outstanding pertaining to the previous years
KIndly respond soon as its very urgent
Thanks in advance
Sir
There is nothing related to accounting treatment..Its all related to taxation of partnership Fims
Umesh
There is no legal requirement to make provision for income-tax liablity in the case of Partnership Firm. However, You may make it.
It is more convinient to debit it to partners capital account.
Regarding Sales Tax Demand you may debit it in P & L as its related to your trading activity. and for Income Tax debit it to partners capital since its firms personal tax liablity which not allowed as expense in Income Tax Act.
Thanks a lot for ur valuable advice.
CAclubindia
