I use this software here in Croatia and I have a question. At the end of the year we have to pay the corporate tax (or income tax) which is 20% of the net profit for the fiscal year (ending 2013). How can I book this in order to have right retained earnings for this year? Also how can I create a Profit and Loss Statement where I can show the Corporate Tax?
First, create two accounts in your
Chart of Accounts:
Income Tax Payableunder
Income Tax Expenseunder
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 Expenseaccount
- Credit $1,000 to
Income Tax Payableaccount
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.
Any way on showing this as a separate in the profit and loss statement?
Earnings Before Income Tax 10000 Income Tax 2000 Net Earnings 8000
Multi-step Profit & Loss Statement is implemented which is roughly 2-3 months away.
Thanks for the effort! Great Job!