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Provision

yogita (ca final year student) (25 Points)

18 May 2007

How do me make entry in Tally for provision for Tax or Deferred Tax Liability instead of debiting Profit & Loss Account.i.e

P & L A/C Dr

To Provision For tax /Deferred tax liability.

Instead of doing this what is the other procedure?

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4 Replies

CA.Sachin Bajaj (Chartered Accountant) (138 Points)
Replied 18 May 2007

Items like prov. for tax, fbt,deffered tax etc are all the items of below the line. It is better to transfer the balance of P&L A/c to P&L appropriation a/c & then charge prov. & reserves from it & transfer the balance to Reserves & surplus a/c. Any other views are always welcome.

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Raj (37 Points)
Replied 19 May 2007

Hi Yogita, Provision for taxation is indeed an expense and a current liability. It is not an appropriation but an expense. Though it is presented in the financial statements as followS PROFIT BEFORE TAXATION XXXXX PROVSION FOR TAXATION XXXXX PROFIT AFTER TAXATION XXXXX It does not make it a below the line item. YOur entry is correct. P&L A/c to Provision for taxation A/c. Why would you need to pass an entry otherwise? In tally create provision for taxation under Current liability group - taxation subgroup (if you want it that way - create it) Similarly same goes for provision for Fringe Benefit tax. However it is not an allowable deduction as per section 40(a). Same goes for deferred tax. It is groped along with provision for taxation. Let me know if it helps you.

Rajesh Bajaj (433 Points)
Replied 19 May 2007

Hi Yogita i tell yu that how enter provision in tally 1 Income tax Provision Dr (Indirect Exp) Provision for Income Tax Cr(Current Liab) 2 Provision for Income Tax Dr(Current Liab) Advance Tax Cr (Loan & Advance Asset) TDS Recoverable Cr(Loan & Advance Asset) Income Tax Payable Cr (Provision) (current Liability) With Regard Rajesh Bajaj