If in the question of fund flow statement, balances of Advance payment of tax is given in balance sheet, then what will the treatment for it, will it be taken as current assets or will be adjusted in provision for taxation account?
7 Replies
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 01 May 2010
A. Provision for Tax and Advance Payment of tax are two different things..
B. Hence, it will be considered as CURRENT ASSETS
vikash rathi
(Chartered Accountant)
(787 Points)
Replied 01 May 2010
consxidered as current asset.........provison for tax is different ...here provison is made by debiting p/l a/c ...but advance tax is a just a type of advance ...no exps is debited........
(Guest)
It depends upon adjustments given in question.
If any current year provision of tax is made it is shown on Cr. side of provision of tax A/c,, and if u get balancing figure on Dr. side of provision for tax A/c transfer that to Advance tax A/c(Cr.side of Adv.tax). Balance you may get on debit side as tax paid in adv. tax a/c.
The above figure of tax paid is shown as application in fund flow. The current year provision of tax is shown in Adjusted P&L A/c.
Dimple
(Student)
(364 Points)
Replied 01 May 2010
Please refer jun09 suggested and make it clear to me plssssss............
(Guest)
In these types of adjustments Kindly take care of following points in addition to my reply given above.---
1-- Draw Provision for Tax a/c and adv. tax A/c. by assuming that you are drawing for first time. Accordingly post all items in the Accounts.
2-- In this question(june 2009) the liability was assessed as 76000 for the period 1.4.2007 to 31.03.2008. As given in B/s the provision was only 70000 for that year ,so in prov. for tax a/c you provide shortage of 6000 on credit side. Then transfer the op. bal of 70000 also. Now as per B/s at end the provision bal is 100000, it means this is for current year. take 100000 provision into cr. side( assume you are drawing first time).. On the same transfer the closing balance of 100000 on dr. side of prov. for tax a/c. Balance the a/c and transfer it to adv. tax a/c which will be 76000
3-- Now in Adv. tax a/c you have op. and cl. balances + bal trfd from prov for tax a/c of 76000 on cr. side.
4--- Also in current year you have recd a refund of 4000 on account of excess adv. tax for that you credit back adv. tax a/c. by passing entry as Bank A/c Dr.// To Adv. Tax A/c.
5--- now balance adv. tax a/c and u will get tax paid for current year as 105000 on dr. side..
6--- At end show 105000 as application in fund flow , 4000 as refund in fund flow sources and prov made during the year 106000( 100000 + 6000 of prev year also) in adjusted P& L a/c. Rs 6000 is done bcz its made in current year to match the liabilty assessed.
Hope you have understood. Any more doubts on it, ask again without hesitation.
Dimple
(Student)
(364 Points)
Replied 02 May 2010
Thanks Faiz Ahmed...I will do that ques again, And will reply...Thanks a lottt... 
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