11 July 2010
Suppose A Company HAs 200000 as provision for Tax on Liability side of and has 230000 as Advance Tax On Asset Side of earlier years Say from 1996-97 to 2002-03...,,,nd nw th company is a loss making co...nd no chances of revival
If th company write-off advance tax against provision thinking no refund will bw obtained and pass th following journal entry...
P & L A/c. Dr 30000 Provision 4 Tax A/c. 200000 To Adv. Tax 230000
What will b its implication on Th operating activities cash flow?
12 July 2010
company must reverse the provision of tax but it will not effect the refund of income tax because reversal of provision is not the income and as per proper accounting it will not effect the advance tax a/c and can not be adjusted against it, however it will effect accounting profit not taxable profit.
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