guest (student) 06 May 2008
Q: 1) provision for taxaion @ 20% is to be made on net profit.
2) create a provision for depreciation @ 10% on current value of future.
value of furniture is Rs.200000
3) received interest on fixed deposite with S.B.I of Rs.17690. TDS is deducted @ 20%
please make the above accounting entries, with descripttion.
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M.Sriram Shenoy (CA Final) 07 May 2008
Entry for first question :
DEBIT P & L (OR) P & L Appropriation A/c.
CREDIT Provision for Taxation A/c.
Since provision for tax is an outstanding liability, such account is credited and it will appear on the liability side of the balance sheet.
Entry for second question :
DEBIT Depreciation A/c.
CREDIT Provision for Depreciation (OR) Accumulated Depreciation A/c.
Usually, while giving effect to depreciation, Depreciation account is debited and Fixed Asset account will be credited. But, in this case, Provision for depreciation or Depreciation Fund account will be credited.
Each year, the amount of depreciation gets accumulated into the account, which shall appear on the liability side of balance sheet,or for disclosure purposes, the same can be shown as a deduction from the gross block of fixed assets on the asset side of balance sheet.
Entry for third question :
DEBIT Bank A/c.
DEBIT TDS Receivable A/c.
CREDIT Interest on Fixed Deposits A/c.
Interest on Fixed deposit is an income for us which is credited and the amount of TDS deducted on it is an asset (or in a broader sense, it is a receivable) which is debited. But bank account will be debited with the amount which is actually received by us, i-e after TDS.