What are the accounting entries for tax refund?
Dr. Cash
Cr. Provision for Taxation (B/S)
Being recognition of tax refund receipt
Dr. Provision for Taxation
Cr. Taxation Expense (P/L)
Being recognition of tax refund in Profit & Loss statement (upon finalization of YA)
As noted above, a tax refund is offset against the taxation recorded in P/L ( as evident from crediting taxation). Be noted that, a tax refund is potential indicating that the tax computation is at its final stage ( more or less finalized). Hence, any excess provision with respect to the particular Year of Assessment should be re-assessed / reversed out accordingly.
Thursday, October 30, 2008
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2 comments:
Your blog is nice to use. Thank You.
This would be the correct answer if the refund were received during the current reporting period for overpayments made on revenue during the current reporting period; however, what if the refund is for tax overpayment in multiple prior periods. Would reconciliation of prior period P&L be expected?
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