Mat query

Sir i have a small doubt on the entry that has been posted!!!

Suppose, mat provision is 70000 and income tax provision 50000 ,mat entitlement to be carried forward would be 20000.

The year in which tax becomes payable as per mat ,shudn't the entry be

Income tax a/c  dr                    50000

mat entitlement dr                   20000

       To  Income tax provision                70000

In next year subsequently the provision can be reversed too

Sir could u please clarify

Replies (2)

Dear Sheebu,

What u have written is correct. INstead of passing two entries, u have passed a single combined entry. Effects are saem. Since income tax provision will be Rs.70000/-,charge to P&L a/c will be Rs.50000 net (70000-20000) and mat entitlement Rs.20000 reflected under current assets. Hence both the ways of accounting mat credit entitlement are correct. 

Dear Ms.Sheebu,

Your method will understate the debit towards taxation in p&l account which will not be accetable to the auditors as well as the shareholders. The actual tax debit to the profit should be the tax as per MAT provisions. 

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