sheebu (C.a final student) (99 Points)
11 October 2008Sir i have a small doubt on the entry that has been posted!!!
Suppose, mat provision is 70000 and income tax provision 50000 ,mat entitlement to be carried forward would be 20000.
The year in which tax becomes payable as per mat ,shudn't the entry be
Income tax a/c dr 50000
mat entitlement dr 20000
To Income tax provision 70000
In next year subsequently the provision can be reversed too
Sir could u please clarify
Rohit Khare
(student)
(111 Points)
Replied 13 October 2008
Dear Sheebu,
What u have written is correct. INstead of passing two entries, u have passed a single combined entry. Effects are saem. Since income tax provision will be Rs.70000/-,charge to P&L a/c will be Rs.50000 net (70000-20000) and mat entitlement Rs.20000 reflected under current assets. Hence both the ways of accounting mat credit entitlement are correct.
S.Srinivasaraghavan
(Chief Financial Officer and Co)
(11318 Points)
Replied 17 October 2008
Dear Ms.Sheebu,
Your method will understate the debit towards taxation in p&l account which will not be accetable to the auditors as well as the shareholders. The actual tax debit to the profit should be the tax as per MAT provisions.
CAclubindia
