Journal Entry while making Year End Provision

TAX AUDIT FEES  A/C DR.....(EXPENSE)

  TO ABC & CO. A/C CR....(CURRENT LIABILITY)

  TO TDS PAYABLE  A/C CR.....(DUTIES & TAXES)

NEXT YEAR.....

TDS PAYABLE A/C DR....

   TO BANK /CASH A/C

ABC & CO  A/C DR....

  TO  BANK/CASH A/C......

Provision Entry will be

        Audit Fees A/c Dr   xxxx

               To Audit Fees Payable A/c   xxxx

               To Tds Payable A/c               xxxx

Next Year the entry Should be reversed.

Audit Fees payable A/c Dr      xxxxx

Tds payable A/c              Dr     xxxxx

     To Bank A/c                                   xxxxx

Dear Sommas,

Once TDS deducted in current year, we can not reverse the same in next year. According to Income tax act, TDS has to deduct from Vendor Account, at time of accouting of bill or at time of payment whichever is earlier.

Dear Jasmeet,

Current year to make provision, entry will be

Debit - Audit Expeses A/c

Credit - Provision for Expenses \ Audit Expeses Payable A/c

In next year, after invocie receipt from vendor

Debit - Provision for Expenses \ Audit Expenses Payable A/c

Credit - TDS Account

Credit - Vendor Account  / Creditors Account

I hope above clear your dobut

Originally posted by : CMA.Baskar.V
	Dear Sommas, Once TDS deducted in current year, we can not reverse the same in next year. According to Income tax act, TDS has to deduct from Vendor Account, at time of accouting of bill or at time of payment whichever is earlier. Dear Jasmeet, Current year to make provision, entry will be Debit - Audit Expeses A/c Credit - Provision for Expenses \ Audit Expeses Payable A/c In next year, after invocie receipt from vendor Debit - Provision for Expenses \ Audit Expenses Payable A/c Credit - TDS Account Credit - Vendor Account  / Creditors Account   I hope above clear your dobut

 best answer

Dear Baskar,

Does that mean, TDS Payable will not appear in Current Year?

Only the expense will be taken to Provision for exp.?

FOLLOW THE BASKAR

Dear Bhaskar,

While thanking you for sharing your views, i somehow do not agree with your entries. As per TDS provision, TDS should be deducted when expense is booked (provision is also considered as booking of exp) or whenver paid, whichever is earlier. Hence TDS entry will come in current year.
Entries given by Sushant Singal is correct.

Regards,

Harshil

Golden Rule is to understand the basis of provision created at year end. If basis is regular payments to a known party or Purchase order raised, than tds is deductable at the time of provision only that is before 31/3 even if vendor bill is not received by the deductor. If basis is ad hoc and party to be credited is clearly not known, than no tds is deductable at the time of provision of expense.

And in case of auditor, in case of companies, usually auditors for the next period are fixed in the relevent financial year only, so its remuneration is also very clear at the time of provision, so tds is deductable at the time of provision of audit fee.

Debit - Audit Expeses A/c (1000)

Credit - Provision for Expenses \ Audit Expeses Payable A/c (1000)

In next year, after invocie receipt from vendor

Debit - Provision for Expenses \ Audit Expenses Payable A/c (900)

Credit - TDS Account (90)

Credit - Vendor Account  / Creditors Account(810)

balance in the provision account is 100 and need to make the provision for 1000 more.

(if we have received invoice for partial amount, for the next year also we have to make the provision then how we have to account the old remaining provision balance and new provision)

Previous Year
Audit Fees Dr. (Exp for the relevant year) 100
To ABC & CO. Auditors(under Current Liability- Accrued Liability/Prov. for Exp)  90
To TDS Payable (Under C.L. - Duties & Taxes) 10

Next Year,
TDS Payable (Under C.L. - Duties & Taxes) 10
To Bank A/C 10

ABC & CO. Auditors. 90
To Bank A/C 90
After return filed, give TDS certificate of that 10 as deposited in ABC & Co's. PAN Account.

DR          Audit Expenses            30000/-

Cr       Tds on Profession          3000/-

Cr Auditors Head                       27000/-

DR          Audit Expenses            30000/-

Cr       Tds on Profession          3000/-

Cr Auditors Head                       27000/-