Brilliant Treatment Of Income Tax Refund In Profit & Loss Account

It is shown in the profit and loss appropriation account.

Treatment of income tax refund in profit & loss account. Income tax paid for earlier years Dr profit loss ac To Advance Income Tax Paid 3 If refund is received with interest interest on refund is taxable income Expected refund Advance Income Tax Paid TDS recoverable Provision for Income Tax. The Statement of Profit and Loss will look like this. Tax expense 1Current Tax a - XXX Less.

Profit and loss account. Thats where to put the credit. Only interest on refund can go to the Profit Loss ac.

If provision for income tax and advance tax tds for that year is stands as it in books then you have to make entry Provision for Income tax Dr. If you do not in your profit and loss account one of the nominal accounts you have will be for the corporation tax charge. Debit your Income Tax Expense account to increase your expenses and show that you paid the tax.

However if excess provision for taxation is made i. This is called provision for income tax. Credit your Cash account to reduce your assets.

Journal entry for income tax in case of a partnership firm includes debiting the Income StatementPL Account. Generally all gains and profits derived by an employee in respect of his employment are taxable unless they are specifically exempt from income tax or are covered by an existing administrative concession. The statement will determine pre-tax income and subtract any tax payments to determine the net income.

For SMEs and start-ups claiming the relief the way it is treated in their accounts is pretty easy as the tax credit is not classed as taxable income. Now company Make the voucher entry of this provision by providing amount from profit and loss account. Profit or loss ac.