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Vaneet Monga (Private)     10 May 2021

Income tax provision in books

Dear experts


We have made the provision in books of account
Profit & Loss account Dr.
Provision for income tax Cr.
I have to sumbit one copy of balance sheet in Bank so kindly asvise how to show provision value 29000 in profit and loss account
Net Profit 731000 after provision 702000


 10 Replies

yasaswi gomes

yasaswi gomes (My grammar is 💯 good I)     10 May 2021

It’s debit

Current tax a/c income statement

To Tax Provision a/c liabilities

in nominal account debit reduces value and pbt is reduced by your current tax amount. 

Sourav

Sourav (Student)     11 May 2021

Income tax a/c dr
to Provision for income tax a/c

Provision for income tax a/c dr
to Bank a/c

Profit and loss account dr
to Income tax a/c
1 Like
yasaswi gomes

yasaswi gomes (My grammar is 💯 good I)     11 May 2021

The above two entries are ok, why the third one? 

Sourav

Sourav (Student)     11 May 2021

Income Tax should be transferred to profit and loss as it is and expense
yasaswi gomes

yasaswi gomes (My grammar is 💯 good I)     11 May 2021

Nice Your doing ledger entries, while I understood it as final accounts entries. Sry for the confusion 

yasaswi gomes

yasaswi gomes (My grammar is 💯 good I)     11 May 2021

Ok got it. You debited the current tax liability to create a provision in the first entry. 

Sourav

Sourav (Student)     11 May 2021

Yes you're right
Naveen Kumar

Naveen Kumar   12 May 2021

Sir. so that means income tax is expense.
in tally we need to create the ledger under indirect exp
yasaswi gomes

yasaswi gomes (My grammar is 💯 good I)     12 May 2021

Yes. Tax and provision are different ledgers. Direct and indirect: While direct taxes are imposed on income and profits, indirect taxes are levied on goods and services. from this we can understand you need to have tax ledger for relevant taxes. 

Sourav

Sourav (Student)     12 May 2021

Agree with yasaswi

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