After disallowing donations in Income tax what wil be its in tretment in balance sheet as on liabilities side profits wil increase but on assets side what changes wil come since there would be no changes in bank or cash a/c??
2 Replies
CA D.C. Bansal
(Accounts Head)
(283 Points)
Replied 15 January 2014
You need not to pass any entry for donation disallowed in income tax and it is not required to increase the profit in books. Please note that it is not necessary to match the profit of books with the profit of income tax.
AVTAR SINGH
(Expert)
(1873 Points)
Replied 15 January 2014
It is wrong to say that profit will increase. The profit of the assessee will remain same. The taxable income is different from the profit shown by the assessee. Therefore, disallowance of donation will have impact on the tax liability but books of account will remain same.
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