Journal entry

Capital A/c. Dr. -------- Rs. 165000

    To Bank A/c.------------          -    Rs. 165000

i.e. Prepare Ledger Called S.A. Tax 2016-17 Under group Capital

While payment of Tax liability:

Income Tax Liability A/c Dr.            1,65,000

         To Bank A/c                                             1,65,000

on 31st march 2018, Incometax liability is not considered as current year exp (sole rpoprietor ). so it is to be treated as Drawings for the year. so entry is

Capital A/c                      Dr.           1,65,000

      To Income Tax Liability                               1,65,000

Dear Kanad,

You have to consider two things here.  When you close your books of account for the year 2017-18, you incur the Income Tax payable amount.  So, first you pass the following JV:

Capital A/c    DR  Rs.1,65,000

To Income Tax Payable A/c.  CR  1,65,000

This will create a Liability - Accrual in your financials which will be shown in your Audited Balance Sheet.as on 31-03-2017

Next, when you actually make the payment, say end of October 2017,  you debit the accrual account as explained by Satish above:

Income Tax Payable A/c.  DR  1,65,000

To Bank Account               CR 1,65,000

Hope this is clear.

TAMIJUDDIN M

Thanks a lot sir ... but Sir ... Balance sheet as on 31.03.17 already submitted without considering the Tax Liabillity amount (1,65,000) ... in the balance sheet nothing showing as a Income Tax liability for 2016-17... but as per IT Return self assesment tax is Rs.1,65,000 which is paid on current financial year i;e Oct-17. this is actually happend. 

more over for current year i;e 17-18, estimated income tax to be paid about 2,10,000.. and advance tax already paid 80,000/- ..

required your opinion Sir. 

Thanks a lot sir ... but Sir ... Balance sheet as on 31.03.17 already submitted without considering the Tax Liabillity amount (1,65,000) ... in the balance sheet nothing showing as a Income Tax liability for 2016-17... but as per IT Return self assesment tax is Rs.1,65,000 which is paid on current financial year i;e Oct-17. this is actually happend. 

more over for current year i;e 17-18, estimated income tax to be paid about 2,10,000.. and advance tax already paid 80,000/- .. 

required your opinion Sir. 

 

Mr.Kanad, I am sorry, I could not understand your way of working, neither your auditor's.  Every Auditor will arrive at the IT payable for the financial year submitted and willl give you the Audited Balance Sheet showing the IT amount payble arrived in there.  If the Audit takes place exactly on 31st March and you paid the IT on the same day, fine.  But the Government gave us time first till Sept. 30th, then till Oct 30th, and then till Nov. 15th. 

Unless otherwise you journalise the IT payable amount on 31st March, your accounts, probably may lack in this point.  When you pay the amount exactly on the day of Audit, say Sept 30th or Oct 31st, you could very well pass the bank entry.

Thing is that the Accrued IT could be journalised on the back date, say March 31st, so that things fit exactly the year they are treated due.

Regards,

TAMIJUDDIN M.