Adjustment Entry of Provision for Tax



Provision for tax is treated as estimated base and how will  we pass adjustment  the entry of provision for tax for previous year and assessment year ?

From Paras Sharma from India

Yes, provision for tax is an estimation of tax. We calculate this and deduct same amount from our profit. Actually, there will not any adjustment entry of previous year provision for tax because provision for tax is liability account and we just show its opening balance in provision for tax account's credit side.  But yes, we will pass the adjustment entry of provision for tax for assessment year.

Profit and loss account Dr. 

Provision for income tax account Cr. 

We can explain it with a simple example

For example, you have estimated $ 500 provision for tax in 2010. In 2011, you estimated $ 700 provision for tax.

So, in 2011 assessment year we will pass the journal entry

Profit and loss account Dr. $ 700

Provision for tax account Cr. $ 700

Vinod Kumar

Educator

Prof. Vinod Kumar is an Indian Educator, Motivational Speaker, Naturopathic Practitioner and Entrepreneur . He is the founder of Svtuition... read more »

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