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Journal Entry while making Year End Provision


Jasmeet Singh (Audit Senior)     20 May 2010

Jasmeet Singh
Audit Senior 
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Please clarify me what entry should be passed in case of Provision for Audit Fees(consider TDS also) and entry for subsequent year.

avater

shushantsinghal (BCOM(HONS),C.A)     20 May 2010

shushantsinghal
BCOM(HONS) C.A 
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TAX AUDIT FEES  A/C DR.....(EXPENSE)

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

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

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shushantsinghal (BCOM(HONS),C.A)     20 May 2010

shushantsinghal
BCOM(HONS) C.A 
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NEXT YEAR.....

TDS PAYABLE A/C DR....

   TO BANK /CASH A/C

 

ABC & CO  A/C DR....

  TO  BANK/CASH A/C......

avater

Somaas Kandan (CA Final)     23 May 2010

Somaas Kandan
CA Final 
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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

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CMA.Baskar.V (Cost Accountant)     23 May 2010

CMA.Baskar.V
Cost Accountant 
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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

 

 

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(Guest)

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

Shrilakshmi Raj (CA)     10 June 2010

Shrilakshmi Raj
CA 
 81 points

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Dear Baskar,

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

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

 

avater

CA. jalpesh vaghela (B.COM, F.C.A)     11 June 2010

CA. jalpesh vaghela
B.COM F.C.A 
 4 likes  112 points

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FOLLOW THE BASKAR

Harshil Akhani (article)     25 September 2011

Harshil Akhani
article 
 22 points

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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

Ms Manvinder Kaur Kalra (Partner)     02 March 2012

Ms Manvinder Kaur Kalra
Partner 
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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.

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