INTRODUCTION –

• In this Article I will be discussing about some vital issues which arise while finalizing the Accounts.
• There are some points which are to be taken into consideration while finalizing the Accounts i.e. Finalization of Balance Sheets.
• Issues relating to Provision for Taxation, Creation of DTA/DTL, Fixed Deposits, etc. will be taken up.

SCOPE –

• Provision for Taxation
• Creation of DTA/DTL
• Fixed Deposits
• Identification of Current & Non-Current Liability

FINALIZATION OF BALANCE SHEET (PRACTICAL ASPECT)

PROVISION FOR TAXATION –

• It is created by debiting the profit and loss account i.e. P& L Account Dr. to Provision for Taxation.
• It is created to meet a known or specific contingency.
• Always remember Provisions are made at the end of Financial Year i.e. on 31st of March.
• They are to be revised on yearly basis.
• Let’s discuss it with the Help of an example :-
• Suppose we have calculated the Current Tax for the F.Y 11-12 150000, So Provision for Taxation for the F.Y will be more than the Current Tax.
• It’s just an estimate to meet the current taxation. So the Provision will be 170000.

1. So in the above Excel sheet you can see we have made a provision of Rs.170000 on the basis of our Current Taxation.
2. In the Assessment Year following entry will be passed :-

                      Provision for Taxation Dr.

                                  To TDS (Amount of TDS deducted during the F.Y)

                                      To Advance Taxation (Amount of Advance Tax Deposited)

FIXED DEPOSITS –

• I have seen many people getting confused as to where to show “FIXED DEPOSITS” in Revised Schedule VI.
• Some say it should be shown under Current Assets & Some say it should be shown under Cash & Cash Equivalents.
• The Answer to above is “It should be shown under the Head “Cash & Cash Equivalents”

CREATION OF DTA/DTL –

• These two terms are often misunderstood by the people.
• While Creation of DTA/DTL follow the following Table :-

• Rs.6853 will be shown in P&L Account in the following table whereas Rs.1853 will be shown in Balance Sheet under the Head “DTL”.
• We are claiming Deprecation as per Co.’s Act of Rs.70000 but I.T has allowed Depreciation up to Rs.50000.
• So it means we are claiming Rs.20000 more, hence it will result in Deferred Tax Liability.
• There can be many timing Differences which can be claimed in the same manner.

CURRENT & NON CURRENT LIABILITY –

• First of let’s understand the meaning of “Current Liabilities”.
• A company's debts or obligations that is due within one year.
• Current liabilities appear on the company's balance sheet and include short term debt, accounts payable, accrued liabilities and other debts.
• So let’s proceed further with the help of an example.
• Suppose M/S ABC has taken a loan of Rs.10, 00,000 from SBI Bank, Rajouri Garden. While differentiating Loan into Current & Non-Current Liability, we have to see that, if the Loan will be repaid in full within 1 year from the F.Y of which Accounts are being made i.e. in the Example we are preparing B/Sheet of F.Y 11 – 12, so if the Loan will be repaid within 1 Year i.e. up to A.Y 12-13, it will be Categorized under “Current Liabilities” & if not under “Non - Current”.