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Provsion for tax enries to be passed....plz help!

(Guest)

Can someone explain me the concept of provison for tax and the entries to be passed with an apt examples, including date at which entries to be passed?

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15 Replies

(Guest)

And what are the entries to be passsed in case of excess or short proviisions?

tarun (CA Final (Gr. 2 Passed) & CS Final) (332 Points)
Replied 01 December 2011

1. at year end (tx for the year to b paid in th nxt year) income tax Dr (p/L Ac) to i. tx provision (B/S) 2. Next year begining of the year (All provisions are to b opened) In Tx Provision acc Dr To I Tx account 3. At th time of payment I Tx account Dr. To Bank account

RAJU (LEARNER) (1089 Points)
Replied 01 December 2011

31st March:

Dr. Income Tax (P & L)

Cr. Provision for Income Tax (BS provisions)

Reversal of Provision:

Dr. Provision for Income Tax

Cr. Income Tax ( P & L)

ashish gupta ( student) (1922 Points)
Replied 01 December 2011

Provison for tax is the amount of provision for the income tax liability

i) Advance Tax Dr.

To Bank A/c

i) P&L A/c Dr.

To Provision for Income Tax

ii) Provision for Income Tax Dr.

To Advance Tax

This Entry is passed at the year end

And in case of short provision book the additional income tax paid as expense

Income Tax F.y. __________ Dr.

To Bank A/c

(Guest)

And in case of excess provision?

(Guest)

Plz give any examples...mujhe aise thoda samjahne me problem hoti hai...examples se sab kch samajah aa jata h plssssss

(Guest)

Pls someone do reply!!!

RAJU (LEARNER) (1089 Points)
Replied 01 December 2011

Ashish ji ne examples hi toh diye hai... For excess provision, you need to reverse the original entry to the extent of excess provision. So make entry exactly opposite of the entry that you would have made at the time of making provision. So reversal will be;

Dr. Provision for Income Tax (Balance Sheet item)

Cr. Income Tax (Profit & Loss Account item)

Hope it is clear..

Atul.K. (IPCC+Service) (46 Points)
Replied 01 December 2011

Originally posted by : ashish gupta
	ii) Provision for Income Tax Dr. To Advance Tax This Entry is passed at the year end And in case of short provision book the additional income tax paid as expense Income Tax F.y. __________ Dr. To Bank A/c

Ashish in my opinion these entries are to be done upon actual completion of assessment, not neccessarily at the end of the year.

Correct me if i am wrong.

Vikas Aggarwal (CA ) (207 Points)
Replied 01 December 2011

In the year of Making Provision say 31.3.2011

Entry Are

Profit & Loss A/c Dr XXX

Provison for income tax A/c XXX

2.In the event of Self Assessement(Payment of Income Tax) say 25/09/2011

Provision for income Tax XXX

To Advance Tax XXX(If Any)

To TDS XXX(If any)

To Income Tax Payable XXX(Balance)

3. If u have created a excess provision on 31/03/2011 then to write off excess provision the following entry must be passed along with Above entry in point 2

Provision for Income Tax XXX

To prior period Items XXX

4.If u created less provision than required then u have u pass the following entry along with entry made in point 2

Prior Period Items XXX

To Provision for Income Tax XXX

Excess or less provision of income Tax should be Debited or crdited in prior period items according to Accounting Standards prescribed by ICAI

The Above are correct in every respect

1 Like

(Guest)

Thankyou so much mr. vikas.....now it is clear to me.

Vikas Aggarwal (CA ) (207 Points)
Replied 02 December 2011

Any time Celiena,

sagar (CA Final) (379 Points)
Replied 03 December 2011

Anish has given good example. you just go on passing suggested entris. except the third entry provision still be the debit balance. you can create an asset instead