Actually one of my client he is manufacturing nature and this year he has paid sales tax arrears for last 3 years it costing Rs 8.5 lac due to this I am getting loss in my pl account how can treat said amt and increase my NP
if you want to claim it as a expense(which is i dont thing if scrutiny comes will be allowable, as sales tax is something which you collect & pay so cant be claimed as an expense) then pass a entry Assets dr to liability cr with the amount. When paying the same reduce the liability. & Debit the expense & credit the asset created in one instance or over equal installments as per your convenience.
Or
The right treatment would be as is it an arrears, income in the previous years would have been increased, so just pass entry debiting the "Reserves" & crediting the liability account, which will solve your problem of not reducing the Net profit & also giving the correct effect.
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