Question

Snow White Ltd manufactures a herbal product which is subject to a lower sales tax @ 5%. However, the sales tax authorities have treated the product as non-herbal and demanded a payment of Sales tax of Rs. 10,00,000. Company has filed a legal case and has the opinion that it will win the case and company will have to pay sales tax of Rs. 5,00,000. Analyze the case.

Please answer this with respect to Accounting Standards ​

Answer 1

Answer:

As per As 4 Contingencies and Events after balance sheet date it should make a provision of Rs 5,00,000 in the balance sheet