What will be the accounting entries for tax refund?
Debitt Provision for Taxation
Credit Taxation Expense (P/L)
Getting recognition of tax refund in Profit & Loss statement (upon finalization of YA)
Debit Cash
Credit Provision for Taxation (B/S)
Getting recognition of tax refund receipt
As observed above, a tax refund is offset against the taxation recorded in P/L ( as evident from crediting taxation). Be observed that, a tax refund is prospective showing that the tax calculation is at its final stage ( more or less finalized). As a result, any excess provision based on the particular Year of Assessment should be re-assessed / reversed out appropriately.
