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I have forgot make provision for tax expenses in 2012, How do I correct this error in 2013? What is journal entries?
in IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors by
edited by

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If your 2012 accounts are not yet audited/published then it is simply passing a journal entry with effect from 31 Dec 2012 (assuming your financial year end is 31 Dec) as follows:

Tax expenses   Dr (P&L Account)
   Provision for tax        Cr (B/S Account)
Being the provision of tax for 2012

However if you have already published the accounts then it has to be accounted for as a prior period error. The general rule for prior period errors as per IAS 8 is that you must correct all material prior period errors retrospectively in the first set of financial statements authorised for issue after their discovery (vide. IAS 8.42).  That means in 2013. Journal entry would be:

Retained Earnings/Accumulated Profit   Dr (P&L Account)
   Provision for tax        Cr (B/S Account)
Being the correction of tax under provision in 2012

You also need to restate the 2012 comparative figures.
by Level 2 Member (3.4k points)
selected by
0 votes
You can correct it with retained earnings
by Level 5 Member (11.6k points)


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