Originally posted by : Disha Bhawnani
	Today i was doing a company's tax audit and i noticed a journal entry which was as follows:- VAT Tax Payable A/c Dr.   To Income a/c   So i asked my senior about the same and he replied that it happens when people want to save or get rid of tax liability..   Please suggest whether the accountant was correct in passing such a journal entry.. Thanx in advance!

 I think its okkkk,,,

it can b done for writting off small difference between VAT payable & actual vat paid amount,,

and taking the credit side aproach it may b indirect income or other income but not direct ,,,,

@ Neelam...the amount was nt a small amount..it was a jounal entry of 2 lakh rupees

then its wrong because no  one can write off Govt, duties,,,

Is it paid ???

if not , then it should , no adjustment can b made,,

and also have confirmation about it whether its a excess amount paid ????

Originally posted by : Neelam
	then its wrong because no  one can write off Govt, duties,,, Is it paid ??? if not , then it should , no adjustment can b made,,

they escaped the VAT liability by nullifying the effect by passing this entry..

then what about invoices ???

they are doing this type of entries since 3-4 years ...i just dnt knw whether to argue abt it

 as according to my practice My CA MIT never permitted for such adjustment with Govt. duties,,

you should present ur argument,,,,,,,

It is wrong entry ..........

yes it is a wrong entry

i think its VAT tax made out of income during the year

VAT tax payable        Dr

      To income

vat tax payable is our liability to be paid to the government. how can we treat as income????????????????????

it is wrong entry... he did because to reduce VAT liability  and he will adjust such income tax liability on last day may be he will trf to capital account..and will reduce income tax liability... i think you should trf this query to expert.. nice query...  :-)

u can follow receipt or accrual basis.

in recept basis, expenses are considered when paid recognised as income in the year of receipt.

in accrual basis, input is adjusted agaist output then final amount will be payable/receivable.