Taxes paid / payable

A/c entries 691 views 3 replies

Ambrish

SAP CONSULTANT

29 Points Joined August 2011

Sorry, if I don't have even the basic understanding of Accounting Principals !!

But still I have a little query, which was never been answered. The CA's with whom I discussed give the reference of Tax Law & Procedures but still I feel there is a gap between the Law & Logic.

All the Taxes paid during the year are shown as advance taxes, including all the service tax credit, excise credit etc..

And most of companies / organizations / entity whatever the name be called them in the context of above stated queries, use the electronic books of accounts, where the balance sheet is ready instantenously at the click of mouse, even on 01st April at 1100 hours for the current year.... Does it makes any logic sence to treat all taxes by whichever nature we may call to put in our Final statement of Accounts as "ASSETS"

This logic was relevant when we inaugrated the process of finalization of our books of accounts after the end of operational fiscal year. Does that makes sense now ??

ambrish

Replies (3)

Hemanth Sai

CA-FINAL AUDIT TRAINEE

110 Points Joined April 2011

First of all Tax may be IT or Vat or service are exppenses for the current year and cannot be taken to the balance sheet as assets.

V P Narasimhan

Accounts Manager

793 Points Joined November 2008

Dear

First of all the Taxes (except Income Tax) viz., Service tax, VAT etc you are acting as an agent to the Govt/Deprt. YOu are collecting from your client/customer & paying tothe respective department/s. Keep that in mind and make Ledgers in such a way to finalise these.

Ateeq

CA - Final

218 Points Joined September 2008

In your case it seems that your query pertains to "Why to account taxes paid as advances?" as it resembles.

So the answer would be as follows: -

For every transaction their will be double effect, the effects are as follows: -

if there is any Increase in asset than

Either there will be decrease in any other asset

Increase in other liability.

Same with the liability ie.,

Increase in liability will effect as

Either decrease in any other liability

Increase in any other asset.

So though advance tax payment is our duty but not liability.

Hence while making payment through cash or bank there will be a reduction of an asset but the same thing (i.e., advance tax) cannot be treated as liability. Hence it will be recorded as asset again.

Though the explanation above is bit requires extensive understanding of accounting effects, you can PM for any further queries or reply with an elaborated query.