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How to treat advance tax in cash flow statement

ASHOK MERUVA (student ca final) (74 Points)

16 July 2012

How to treat advance tax in cash flow statement..? Opening provision for tax is 950311 closing provision is 1372566 and opening advance tax is 950000 and closing advance tax is 1050000 my doubt is what is the provision that should be added back from net profit.. And what is the income tax said to deduct after working capital changes

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3 Replies

lakshmikant (student) (44 Points)
Replied 16 July 2012

I can answer one part. As per figures provided by you and my calculations provision to be added from net profit should be 522255. Correct me if i am wrong.

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Pawandeep Singh Ohsan (CA Acconts Officer) (33 Points)
Replied 17 July 2012

as far as provisions are concerned Difference of provisions Rs.422255 should be added and difference of advance tax Rs.100000 should be subtracted in operating activity.

N.Naveena Maheswara Rao (Assistant manager for accounts) (1096 Points)
Replied 18 July 2012

You should see the P&L A/c to find out the provision for tax.If nothing is given in the problem, we should assume that last year liability paid off in the current year and closing liability is the provision for current year.

Hence Current year Provision to be added back is Rs.1372566 and

Income tax paid to be deducted after working capital changes is Rs.1050311

(i.e opening provision(net of advance tax) of Rs. 311 + Cy Provision of Rs. 1372566 - Cl Provision(net of advance Tax) of Rs. 352566.

Income Tax paid = Op. Provision + CY provision made - Cl. Provision

OVERALL AS SAID BY PAWAN OPERATING PROFIT WILL BE DECREASED BY RS. 322255 (1372566 - 1050311)