Journal Entry

my view on the query

they have not accounted input credit of purchase properly but in returns they have availed credit, but booked purchase with input tax, so end of year an amount equivalant to input credit is there in VAT payable account, but the returns vat liability is NIL with vat input credit, so the balance of vat liability which accualy stand there with use of input credit, is taken to income account. 

you have to check , that with such entry the INCOME account is increased.

hello friends,

         my doubt is why it cant be as if vat liability has been adjusted with excess income tax (advance) paid.

hello...boss its wrong...instead of paying duty you are taking it back to income....its a govt dues...VAT payable is a liability to govt..this entry reverses the credit to income...absolutely wrong entry....some big problem...try to find out the reason..........your client may be doing somethign wrong...check once the logic of entry why the govt liab is getting reversed in income

Yes, absolutely no one can written off govt. dues either a rupee or more amount.

Yes it completely wrong entry, how can some one transfer Govt. Tax Liability to Income, the person have to make payment to the Govt Account ....can't transferred to income.

VAT TAX COLLECTED CAN'T BE ADJUSTED IN INCOME AS IT IS A LIABLITY TO PAY DUES .ENTRY HAS BEEN PASSED WRONGLY & AUDITOR HAS TO GIVE QUALLIFIED REPORT ON SAME BY STATING FACTS IN THE REPORT

hiii good mrg to all...........................

This entry may represent the refund figure and consider as a income. But way of passing the entry is wrong.so you should ask from accountant of that company why does that entry passed in the books. and make a report accordingly.At last it seems to be wrong entry ...  

Originally posted by : sanjeev sharma
	hiii good mrg to all........................... This entry may represent the refund figure and consider as a income. But way of passing the entry is wrong.so you should ask from accountant of that company why does that entry passed in the books. and make a report accordingly.At last it seems to be wrong entry ...

i think u hav a point..is it possible that excess VAT collected be converted into income?

than what is the right entry for refund

At first impression, it looks total wrong. If you are reducing your income with VAT liability then you are thereby reducing both your VAT liability and Income tax payable on that income also.

Still confirm the nature of that INCOME A/c. will come to know which income is there in that account and thereby one can tell you whether it is right or wrong.

My opinion  - The entry is wrong. What ever the due amout left back from TAX part it has to be paid to the concern Dept. we can't simply write off by passing a JV.

If there is a Provision for Tax and it is in excess of actual assessed tax payment,  we can wite off by passing a JV.

Originally posted by : Disha Bhawnani
	Originally posted by : sanjeev sharma hiii good mrg to all........................... This entry may represent the refund figure and consider as a income. But way of passing the entry is wrong.so you should ask from accountant of that company why does that entry passed in the books. and make a report accordingly.At last it seems to be wrong entry ...   i think u hav a point..is it possible that excess VAT collected be converted into income?

I think  even if there is excess collection of VAT there is not any provision to reverse the same to income account. The excess amount should be paid to government after setting off with VAT input.....

There might be four wrong possibilities:

1. Client is transferring VAT input & VAT output a/c to common account for setting off. Again income account is inappropriate account  for common pool. Hence wrong entry.

2. Client has not taken Vat input on input material so he thinks that he should not pay Vat Output.   

3. Client has collected excess VAT output so he himself become a surgeon to cut excess amount from VAT output account by transfering into income account .

4. Even if  he transfers the vat amount to income tax payable account then too it is wrong as State levied VAT can not be clubbed with Income tax.

  In all cases the entry seems to be unacceptable.

Completely Wrong Entry...,

its is a wrong entry VAT is a state level tax however Income tax is a central level tax so they cant be set off with each other they have pay the VAT liability...

chotu ye entry wrong hai