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Why do we put 200 in the income tax expense in sopl? Since the 200 was a debit balance, doesnt that mean its 200 which we have already paid for and thus would actually reduce the tax liability?
Hi,
because we made an under provision of tax in last year of 200$. And now we have closed our financial statements of the last year and that cannot be adjusted. So we will treat it as an expense for this year in our profit and loss account. Now we also made a provision of tax payable with 1500, if we again make an under provision for example of “300$” so this 300 will be transferred as an expense for the next year.
and for example that 200$ represented the “over provision” then our tax expense would have reduced to 1300, and also the payable would have been 1300?
please correct me if I am wrong.
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