Thursday, October 30, 2008

#52 Tax Refund

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.

2 comments:

Tax Jobs said...

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jtroyj said...

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?