Income Tax Journal Entry

Income Tax Journal Entry

Income tax is an expense for the business. Thus income tax is debited and a liability is created with the name of provision for tax. The tax liability is normally is expected to be paid in next year.

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

Tax Payment Journal Entry example

Following entry shall be recorded on the payment of tax. The provision shall be debited and cash would be credited.

Date	Particulars	Dr.	Cr.
2014	Provision for Tax	$ xxx
2014	Cash		$ xxx

Tax journal entry Example

Business income =40,000

Tax rate= 30%

Tax expenses shall be recorded at the end of the year in 2014 by following entry. Tax expense is debited and provision for tax/tax liability is credited.

Date	Particulars	Dr.	Cr.
2014	Tax	$ 12,000
2014	Provision for tax		$ 12,000

Tax shall be paid in 2015 and the following entry shall be recorded. Provision shall be removed by debiting the provision and crediting the cash.

Date	Particulars	Dr.	Cr.
2015	Provision Tax	$ 12,000
2015	Cash		$ 12,000