Provision of audit fees with tds and gst credit

anshu (34 Points)
Replied 23 November 2017

Dear,

While Making provision at year end the entry would be

Audit fees exp Dr. 50000

To TDS on Professional Fees 5000

To Audit Fees payable 45000

Current year entries

for payment of TDS

TDS on professional Fees Dr 5000

To Bank 5000

Bill received with 9000 ITC GST

Entries as for reversal First

Audit fees payable Dr. 50000

To Audit Fees Exp. 50000

Pass the Correct Invoice

Audit fees Exp. Dr. 41000

GST Dr. 9000

To Auditor A/c 50000

(Narraton as TDS would not be deducted because already deducted on provision )

Auditor A/c Dr. 50000

TO Bank 45000

TO Audit Fees payable 5000

(Payment entry would be as )

On the Basis of Entries accounted as above you will see that Audit fees exp has been reduced with Rs equal to GST Credit which was not booked in Last year. simultaneously Audit Fees payable Ledger & Auditors A/c also being have been sett off.

2 Like

CA Meet Sagarka (Chartered Accountant) (122 Points)
Replied 13 January 2018

Thanks a lot!!! I am facing this issue from many Days but my doubt is getting clear.

Kajal Sawant (4 Points)
Replied 19 April 2018

dear sir

i want to make provision for profeesional fees what entry should i pass in tally plz help me out

sandeep (article) (26 Points)
Replied 07 June 2018

For Provision

Audit Fees A/c Dr. 50000

To Auditor 45000

To TDS payble 5000

On receipt of Invoice

Auditor A/c Dr 45000

CGST Dr 4500

SGST Dr 4500

TO bank A/C 54000

Rupesh Gharge (Tax consultant) (51 Points)
Replied 31 July 2018

As per my point of View, Whenever such provision entries are made it is for satisfying matching principle of accounting. That the expenses should be related to the FY of the accounts prepared and income earned. Hence, expenses are booked and provided on 31st march for which bills will be received later.

But the thing is such entries are unnecessarily complicated with tax provisions relating to TDS and GST.

We must understand the difference between Creditors and Provisions.

Creditors are real accounts and provision for expenses are nominal account. Creditors should be booked only when a bill is recieved because unless a bill is recieved one cannot ask for payment. Creditors are confirmed amount while provision is an estimate. When we make any provision we are not liable to pay the party it is just a provision.

for example, when accounting services are recieved for Jan to Mar 2018 for Rs 25000/-and a bill is recived in april 2018.

Then expenses should be provided only for Rs 25000

accounting fees (P/L) a/c Dr 25000

To accounting fees payable a/c (provision) 25000

and when actual bill is recived then in April which may be higher or lower of amt provided then the entry will be

Accounting fees payable a/c Dr 25000

GST a/c Dr 4500

To Tds 2500

To creditor 27000

TDS liability comes only when the amt is credited or paid to party account whichever earlier.

Also, GST Setoff is available only when a bill is recieved.

Further, the 30% expense will not be allowed under income tax provisions as TDS is not allowed but will be allowed later in next FY in which the tds is deducted and paid. It may also have effect on defferred tax working.

I hope the above explanation will help.

1 Like

Rajat solanki (.) (498 Points)
Replied 02 August 2018

But its also written in tds provision that credit can be in what so name possible even suspense account so that the reason tds should be deducted on provision entries

https://www.in.kpmg.com/taxflaashnews/KPMG-Flash-News-Destimoney-Enterprises-Limited-2.pdf

Here is the full wite up

boseandcharles (Expert in Practice) (24 Points)
Replied 02 August 2018

I almost agree with Rupash except the accounting part.

Accounting at the year end shall be:

accounting fees a/c Dr 25000

To TDS on Professional Fees 2500

To accounting fees payable a/c 22500

This will help us in completing all the compliance procedure and accrual basis of accounting.

At the time of actual reciept of invoice following entries shall be made:

Accounting fees payable a/c Dr 22500

GST a/c Dr 4500

To creditor A/c 27000

Thus our payment liability towards TDS and creditors are outstanding till payment. GST credit is consiered. Expenses is booked on year end and provision entry is completely set off.

Hope the above is clear.

CA/CS PRASHANT MOLIYA (PARTNER) (35 Points)
Replied 16 August 2018

I have totally different opinion about Provisions and its accounting.

1. Without Bill/Invoice Expense entry can not be passed.

2. Provision is not an expense. So Provisions can not be in Profit and loss account in above line. Provision can be made out of profit and consider as below line.

3. All payment before Bill / Invoice is called "advance payment" and after Bill called "paid to creditors"

4. for Audit fees entries

31.03.2017 Profit and Loss A/c Dr. 25000
To Provision for Audit fees 25000
( Provison for Audit fees is balancesheet Item )

30.09.2017 Provision for Audit fees A/c Dr. 25000
To Profit and Loss A/c 25000
( Actual bill received dated 30.09.2017 now provison become liability )

30.09.2017 Audit Fees A/c Dr. 25000
CGST Dr. 2250
SGST Dr. 2250
Out of Pocket Exp(lunch exp) Dr. 500
To Chartered Account Name 27500
To TDS Decucted 2500
( Bill No. 1234 dated 30.09.17 recorded )

30.09.2017 Chartered Account Name Dr. 27500
To Bank A/c 27500
( Fees Paid )

31.03.2018 Profit and Loss A/c Dr. 35000
To Provision for Audit fees 35000
( Provison for Audit fees is balancesheet Item )

5. There may be excess provison or sort provision also.

6. Purpose of Provisions is not to distribute profit to partners or transfer to reserve or issue dividend. In Income tax only specified provision are allwed to transfer to profit and loss account.

7. As on balancesheet date i.e. 31.03.20xx there is not any actual liability or creditors or payables. Its just shown in balancesheet separate head of provisions. So making provision does not mean creating liabiity and booking expenses.

sushil (accountant) (25 Points)
Replied 22 December 2018

but this entry not pass in tally with effect in 3B itc claim

Shreyastha Jha (shreyashrestha30@gmail.com) (22 Points)
Replied 22 April 2019

Can we create a Provision for GST payable in the Provisional Balance Sheet for the year ended 31st March, 2019?

shahyar husain (1235 Points)
Replied 10 November 2020

Dear sir! Thank you for clearing this doubt. However I had one more question to add to it. Under which circumstances TDS is applicable to audit fees?

Ayushi Arora (298 Points)
Replied 12 February 2021

An accrual for auditing services received should only be made when auditing services have been rendered and any outstanding balance is due.

TDS liability only comes in when the amount is paid/credited earlier, whichever happens first.

There may be the excess provision or sort provision also.

The purpose of Provisions is not to distribute profit to partners or transfer to reserve or issue dividends. In Income tax, only specified provisions are allowed to transfer to profit and loss account.

As on the balance sheet date i.e. 31.03.20xx there is not an actual liability or creditors or payables. It's just shown in the balance sheet separate head of provisions. So making provision does not mean creating liability and booking expenses.

PRIYANK VIJAY (PARTNER) (22 Points)
Replied 10 October 2023

SIMPLE ENTRY

1. ON 31.03.2023

AUDIT FEES A/C DEBIT 100000/-

TO PROVISION FOR AUDIT FEES 100000/-

( NO TDS ENTRY NO GST ENTRY)

2. ON 01.04.2023 Reversal

PROVISION FOR AUDIT FEES DEBIT 100000/-

TO AUDIT FEES 100000/-

(NO TDS NO GST)

3. WHEN AUDIT FEES BILL RECEIVED

AUDIT FEES A/C DEBIT 100000/-

INPUT GST A/C DEBIT 18000/-

TO AUDITOR 1180000/-

THAN TDS ENTRY

AUDITOR A/C DEBIT 10000/-

TO TDS PAYABLE 10000/-

WHEN PAYMENT

AUDITOR A/C DEBIT 108000/-

TO BANK 108000/-

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