Current Tax Accounting

Current Tax Accounting

Tax accounting broadly classified into current tax and deferred tax account. In this article we would discuss current tax accounting. The current tax is treated a business expense and charged in comprehensive income as expense. Current tax is recorded by the following entry

Tax is debited being the business expense and a liability is created with the name of provision for tax.

Date	Particulars	Dr.	Cr.
	Tax	$ xxx
	Provision for Tax		$ xxx

Current Tax Accounting Treatment

Some important characteristics of current tax are listed below

a)    Current Tax is a business expense.

b)   Current Tax is calculated at the end of the year.

c)    Current Tax is calculated as % of profit.

d)   Tax provision is created, because tax is to be paid in next year.

Current Tax Formula

Current tax is calculated as percentage of profit. Tax rate formula is given below

Current Tax = Profit x Tax rate

Current Tax Accounting Example

Profit = 150,000

Tax Rate = 25 %

Calculated and Record the Tax?

Solution

Tax = 150,000 x 25%

= 37,500

Tax expenses shall be debited and provision for tax would be credited in the books of accounts.

Date	Particulars	Dr.	Cr.
	Tax	37,500
	Provision for Tax		$ 37,500