Provision for Tax in Cash Flow Statement
(1) If the provision for taxation account appears only in the balance sheet:
In this case the previous year amount is treated as outflow in operating activities and the current year amount is added while calculating the profit before tax.
(2) If the provision for taxation account appears in the balance sheet and additional information is also given regarding the payment or provision for tax during the year. In this case the Provision for Taxation account is to be prepared and the treatment done accordingly.
Dr.                         Provision for Taxation account                         Cr.
| Particulars | ` | Particulars | ` |
| To Bank(Tax paid){O,O}
To Balance c/d( Closing balance) |
By Balance b/d( opening balance)
By Profit & Loss Account(Provision made during the year){PBT,A} |
||
| Total | Total |