hi i have on quary regds advance tax if advance tax paid 50000 and provision 150000 in trail balance in adjustment total tax liabilites of tax is 200000 than what will be the treatment in final accounts
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Treatment of advance tax
Replies (11)
Provision a/c Dr. 1,50,000
TO advance tax 50000
To bank 1,00,000
Prov. For tax Dr. 150000.00
Advance Tx Cr. 150000.00
I.TAX Paid dr. 200000.00
Prov for tax cr. 150000.00
Advance Tax Cr. 50000.00
Income tax refundable Dr. 300000.00
Advance Tax Cr. 300000.00
Mr. Amit is correct I though advance tax is 5,00000.00
Mr. Amit is right...
Prov. For tax Dr. 150000.00
P/L a/c. Dr. 50000.00
To Advance Tax Cr. 50000.00
To Tax Payble Cr. 150000.00
Mr. Amit is right
As against the total liabilities of Rs. 200000 ,
first of all we will have to pay Rs. 50,000 less, as paid in Advance, so nullify that amount by crediting Adv. Tax with Rs. 50000
Then to pay the remaining Rs. 150000 we have provision made earlier so that the Dr. 150000 will not affect the current year P&L A/C
So, net Rs. 150000 we will pay in cash this year & complete liability will be end up.
Thus as earlier Mr. Amit has mentioned The Treatment of this transaction will be as under :
Provision a/c Dr. 1,50,000
TO Advance Tax 50,000
To Bank 1,00,000
agree with Mr. Amit
DR
Income tax
200000/-
CR
Provision for I.T
200000/-
(entry for I.T)
DR
Provision for I.T
50000/-
CR
Bank
50000/-
(When you make part payment)
DR
Provision for I.T
150000/-
CR
Bank
150000/-
(when you pay the balance 2,00,000/- less 50,000/- tax )
| Originally posted by : basit | ||
 |
DR Provision for I.T 50000/-
DR Provision for I.T 150000/- |
 |
PL ..... DR 50000
TO PFT.......DR 50000
2) PFT.......... DR 200000
TO ADV TAX 50000
TO TAX LIAB 150000
3) TAX LIB ...DR 150000
TO BANK 150000
We cannot nulify the provision account with advance tax, self assessment tax or TDS till we receive assessment order from IT department. In the given problem, the total tax liability is Rs.200,000 but provision created is only Rs.150,000. So, firstly you need to create additional provision of Rs.50,000. The advance tax and self assessment tax (difference of Rs.150,000) needs to shown separately under current assets.
So entry would be.
Tax expense Dr. 50,000
to Provision for income tax Rs.50,000
(by this your provision will go up to Rs.200,000 which is your tax liability)
Advance tax and self assessment tax wil be shown separately.
I hope you understood.
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