It is clear ,that WHT liability would be account for only at the time of payment to party(<b>sec 153),</b>and not on accrual basis.
Does same rule apply to Income earned but not received?,,we pay tax on our income instead of profit & loss account(<b>performance of contract i.e. 6% of income</b>),if we donot account for "WHT on income" of <b>june 09</b>,we must pay <b>tax in cash/bank </b> with annual return,(because june-09 WHT willnot adjust,while calculating our tax)
R/A from contractor-DR
Mobilization Adv----DR
Retention money-----DR
<b>WHT on june-09---DR</b>
Contarct Income-----CR(not yet received)
is this entry true on 30-06-09
Dear,
It seems that you are concerned with section 153, rectify me ?
However, (if not concerned with the above)
As per sub section 3 , Division IV of the ordinance "A company shall account for income chargeable to tax under the head âIncome from Businessâ on an accrual basis, while other persons may account for such income on a cash or accrual basis".
It clearly mentions that a company is having mandatory requirement to account for on accrual basis while it is optional for others to use either cash or accrual basis of accounting.
In my opinion, this must have solved your subsequent problems, that have been asked by you.
Also, What does it mean, "we pay tax on our income instead of profit & loss account"?,
Best Regards,
Dear,
Now your question appears to be logical after getting Edited,
Based on the given situation, your entry is correct,
Best Regards,
Faisal
i am not clear yet,about WHT on section 153,<b>on 30-06-2009</b>
<font size="4"><b>Case---1</b></font id="size4">
<b>option 1)</b>material purchase on credit
(probably to pay after 2 month of year ending)
Material account------Dr
WHT-------------------Cr
newage cable pvt ltd--Cr
at the time of payment
WHT-------------------Dr
newage cable pvt ltd--Dr
BAnk------------------Cr
<b>Option )2</b>
(probably to pay after 2 month of year ending)
Material account------Dr
newage cable pvt ltd--Cr
at the time of payment
newage cable pvt ltd--Dr
WHT-------------------Cr
BAnk------------------Cr
<font size="4"><b>Case---2</b></font id="size4">
<b>Option)1</b>june-09 accreued income
BSC account--------Dr(account receivable)
Contract Income----Cr(june accrual)
at the time of receive
Bank---------Dr
WHT----------Dr
BSC account--Cr(account receivable)
<b>Option)2</b>
BSC account--------Dr(account receivable)
WHT----------------Dr
Contract Income----Cr(june accrual)
at the time of receive
Bank---------Dr
BSC account--Cr(account receivable)
Which enteries are correct from both cases?
Dear,
Regardless of my previous reply,
If payment is to be made after 2 months then Under case 1 , option 2 is correct and Under Case 2, option 1 is correct.
Now a question may arise from your side that how would WHT be adjusted under both of the cases , remember , practically under these cases, on these transactions, WHT is adjusted in the return of the next Tax Year.
However, under case 1,regardless of the provisions of Law, option 1 is also correct, since deduction is certain and payment of WHT may be made after transacton has been taken place, Under case 2 deduction is not certain and not likely to be occurred, so WHT - Debit, is not seems to be logical, furthermore, this alternative will fail, should the goods are returned to supplier,( or by custmer)
hence, to adjust WHT in the next year is more feasible.
Best Regards,