Mat journal entries

Devendra (Chartered Accountant) (4775 Points)
Replied 11 November 2011

Following is the JV to be passed :-

Income Tax paid A/c Dr. XXXX

(Grouped under the head Indirect Exps)

MAT Credit A/c Dr. XXXX

(Grouped under Current Asset)

To Provision for Income Tax A/c XXXX

(Grouped uner the heads Provisions)

Regards,

Devendra K

2 Like

RAMESH KUMAR VERMA ( CS PURSUING ) (43853 Points)
Replied 11 November 2011

MAT credit entitlement will be treated as an asset and the accounting will be done by crediting the Profit & loss A/c, if there is a virtual certainty that the company will be able to recover the MAT credit Entitlement in future limited period. It will be disclosed under Loans and Advances. In the year of adjustment full provision shall be made for Tax Liability, and in the Balance Sheet the Provision for Tax shall be shown net off MAT credit Entitlement.

Journal entries (AY-2009-10)

1) Profit and loss A/c………. Dr 190

To Provision for Tax 190

2) MAT Credit Entitlement A/c……… Dr 90

To Profit and loss A/c 90

Journal entries (AY-2011-12)

1) Profit and loss A/c………. Dr 200

To Provision for Tax 200

The MAT credit entitlement will be shown as deduction from Provision for Tax in the Balance Sheet

Provision for Tax 200

Less: – MAT credit entitlement (50)

Net 150

for more info:

https://catuts.com/minimum-alternate-tax-mat/

4 Like

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 11 November 2011

I think that as Mat paid is an asset to the company only the following entry will passed in the books.

Mat Receivable Dr

To Bank.

As it is an asset it should not be routed through the P&L account as an item can be shown either as an part of the P&L or the BS. It cant be shown both as an part of BS & PL.

the Mat credit can be c/f for upto 7years. If the comapny is cetain that there will be sufficient taxable income in the future then it can offset it's liability with Mat credit. In that case entry will as follows:

P&L dr

Prov for tax CR

& Prov for Tax Dr

mat Receivable Cr

krishna (CA) (27 Points)
Replied 21 July 2016

What if my company has utilized whole MAT credit but no accounting treatment is given in previous years and MAT Credit is still in asset. What rectifying entry should be made for the same?kindly please give your opinion on this.

peddi rajesh (11 Points)
Replied 11 October 2017

Dear Sir,

Mat credit is utilised if income tax payable is more than mat.so as per your question mat credit allowed in the earlier years but no entry is passed.suppose for 2nd year provision for tax is 100(incometax),mat is 80, mat credit entitlement A/c has balance 20. it means you are eligible for credit 20.you are required to pay is 80.so at the time of payment debit provision for tax 80 . so provision for tax closed up to 80.if you not adjusting i.e debit provision for tax,&credit mat credit entitelement A/c both having balance 20. if you not passing this adjustment entry both provision for tax&mat credit entitelement A/c is not closed.

rectifying entry is debit provision for tax & credit Mat credit entitelement A/c

peddi rajesh (11 Points)
Replied 11 October 2017

Dear Sir,

Mat credit is utilised if income tax payable is more than mat.so as per your question mat credit allowed in the earlier years but no entry is passed.suppose for 2nd year provision for tax is 100(incometax),mat is 80, mat credit entitlement A/c has balance 20. it means you are eligible for credit 20.you are required to pay is 80.so at the time of payment debit provision for tax 80 . so provision for tax closed up to 80.if you not adjusting i.e debit provision for tax,&credit mat credit entitelement A/c both having balance 20. if you not passing this adjustment entry both provision for tax&mat credit entitelement A/c is not closed.

rectifying entry is debit provision for tax & credit Mat credit entitelement A/c

peddi rajesh (11 Points)
Replied 11 October 2017

Dear Sir,

Mat credit is utilised if income tax payable is more than mat.so as per your question mat credit allowed in the earlier years but no entry is passed.suppose for 2nd year provision for tax is 100(incometax),mat is 80, mat credit entitlement A/c has balance 20. it means you are eligible for credit 20.you are required to pay is 80.so at the time of payment debit provision for tax 80 . so provision for tax closed up to 80.if you not adjusting i.e debit provision for tax,&credit mat credit entitelement A/c both having balance 20. if you not passing this adjustment entry both provision for tax&mat credit entitelement A/c is not closed.

rectifying entry is debit provision for tax & credit Mat credit entitelement A/c