Disallowed expenses accounting entries

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

01 March 2013 Dear All,
A private ltd. co. has been scrutinized by AO
for the year 10-11 and disallowed advertisement exp Rs. 5 lacs due to not making the provision of TDS. and now in march 13 the tax on such disallowed expense has been paid this year.
now , how to make the accounting entries in this year? please give the full accounting entries.
whether that expenditure will be considered as prior period items?

CA Parul Saxena online

CA Parul Saxena online

(Expert)
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01 March 2013 The expense will be charged against profit and loss a/c, however it would be disallowed by the department.

The entry will be:-
Income tax demand Dr.............xxxx
To bank..........................xxxx
It is not prior period item....

Querist : Anonymous

Querist : Anonymous (Querist)

01 March 2013 incometax paid in this year is also diallowed in this year also. so where to show "Income ax demand" in books of accounts ?

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CA Parul Saxena online

CA Parul Saxena online

(Expert)
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01 March 2013 Yes disallowed.......but you can charge it in your books as expenditure and while computing income tax provision of current year do not consider this expenditure

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Querist : Anonymous

Querist : Anonymous (Querist)

01 March 2013 thank you Parul

Querist : Anonymous

Querist : Anonymous (Querist)

01 March 2013 but in year which it was disallowed by AO the net profit would have increased in that year. so what and how will be carry such differential profit in the current year? please specify the entry for the current year.