I have an issue with the GST Calculation Worksheet for BAS (Australia) showing income tax as sales (under G3) and Purchase (under G11 and G14).
I have follow one of your forum topics and crated two accounts in the Chart of Accounts and after that Journal with Debit to Income Tax Expense account and Credit to Income Tax Payable account. Balance was 0 and all was GST free. .After that I have made a payment transactions that categorized as Income Tax Payable (Liability). All works fine.
However, when I create reports and GST Calculation Worksheet for BAS I got input as a sales in and purchases in . Balance on the end is “0” again and the final balance on this worksheet was OK.
Therefore my issue is that Income tax should not be reported as Sales nor Purchases. For example if in the last quarter I do not have any sales (income) in the Worksheet will be reported that I have sales of $ which is really income tax or liability.
I would like that my book keeping is correct if possible.
I am not sure if this is clear enough and understandable. I can create some screen shots but this post is already long.
"lubos Jan '14
First, create two accounts in your Chart of Accounts:
Income Tax Payable under Liabilities Income Tax Expense under Expenses
Then create new journal entry to account for income tax expense, let’s say the income tax is $1,000
Debit $1,000 to Income Tax Expense account Credit $1,000 to Income Tax Payable account
This will bring your $1,000 into Profit & Loss Statement.
When you pay income tax to tax authority, it’s simple cash payment transactions that will have to be categorized as Income Tax Payable so your tax liability comes to zero once the tax is actually paid."
PS I have read post:What account does corporation tax go under? Jun15 as well.