15 June 2010
I have one client which is a ltd. company. Suppose it has made provision for taxes for the year 2007-08 Rs. 150000/-. And the actual tax liability comes in the assessment of this company is Rs. 125000. So Rs. 25000/- is refunded by IT department with interest. Now the problem is what accounting entry is to be passed for Rs. 25000/- which is a excess provision? Whether it should be debited to provision for taxes account or it should be taken as income.
15 June 2010
Entry will be Prov for it...........Dr 25000 To, Reserve & surplus 25000 Bank A/c ............Dr 25000 Provsion for it......Dr 125000 To, Advance tax 150000
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