Journal Entry

Dear all,

Study the following carefully.

Say Input vat is added with the purchase. If a company wants to avail cenvat credit, then first of all Output VAT or Vat payable must be reduced. On the other hand input vat is added with the purchase and if cenvat credit is availed the purchase figured must reduced by the Input VAT amount. So the purchase figure will be decreased as a result the income will be increased. So technically VAT PAYABLE IS REDUCED THAT IS WHY VAT PAYABLE IS DEBITED AND INCOME IS INCREASED FOR THAT INCOME IS CREDITED.

I think the entry is absolutely correct, although this adjustment must be properly shown in the VAT RETURN. The accountant has done this to save time. This is a book entry.

If any one is in a disagreement with my theory, please make comment with reasons.It will be highly appreciated by me.

Absolutely Wrong entry. There is one possibility---------- last year they have shown VAT payable instead of Income Tax  Payable. now its rectified

old Entry to be passed in tht year

Income Tax / or any  A/c Dr.

To Income Tax payable

they made  credit to VAT payable instead of Income tax payable. Now rectified as

VAT Payable A/c Dr

To Income tax payable Cr.

You can ask  to accountant

accordin to ma opinion in India there is no provision in tax laws that allows u to take credit of one tax wi th anothere whether it is direct or indirect.

In the light of above statement we may conclude that the above entry is in contra vention of provisions until and unless the entry is not being made for any rectification in response to any error has been made in accounts earlier.

oh i am sorry i read it as income tax account. its absolutely wrong entry. but yes it may be an adjustment entry . for this u should see the narration or ask the accountant . whats the purpose of passing this entry

in that case if amt excess charged from cuotomers in the invoice than entry to be passed as followss

Dr Vat payable a/c

Cr to party a/c

and issue the credit noe to parties or if vat charged according to prescribed rate than full amt to be deposited to Govt a/c, w/off through income a/c is wrong.

please let me know the narration given for Jv...

this entry cannot be justified... however need to check ....