## Income Tax Paid — Combined Ledger Method
In CFS, income tax paid means actual cash outflow for tax, not the P&L provision charge. When both Provision for Tax and Advance Tax exist, they must be combined into a single ledger to find actual cash paid.
### Why combine?
Advance tax (prepaid tax) is paid before assessment; provision for tax is recognised in P&L. When tax is finally settled, advance tax is adjusted against provision. The net cash outflow during the year is found from the combined picture.
### Combined Ledger Structure
```
Combined Tax Ledger (Provision for Tax + Advance Tax)
Dr Side Cr Side
Opening Advance Tax ××× | Opening Provision for Tax ×××
Tax Paid (bal figure) ××× | P&L provision (current yr) ×××
Closing Provision ××× | Closing Advance Tax ×××
```
Tax Paid (balancing figure) = Opening Advance Tax + Closing Provision + Tax Paid = Opening Provision + P&L Provision + Closing Advance Tax
### Formula shortcut
```
Tax Paid = Opening Provision + P&L charge
− Closing Provision
+ Closing Advance Tax
− Opening Advance Tax
```
### Identifying in question
- If only Provision for Tax is given (no advance tax): simpler — Tax Paid = Opening Provision + P&L − Closing Provision
- If both are given: always use combined ledger
- If question gives 'Advance Tax paid during the year' directly: that IS the cash outflow for advance tax; still reconcile via ledger
### Classification
Income tax paid is classified under Operating Activities unless it can be specifically identified with a financing or investing transaction.