# How to account for corporate tax

**URL:** <https://forum.manager.io/t/how-to-account-for-corporate-tax/390>\
**Category:** Uncategorized\
**Created:** [January 19, 2014, 1:07pm UTC](https://forum.manager.io/t/how-to-account-for-corporate-tax/390 "2014-01-19T13:07:32Z")\
**Posts on this page:** 6\
**Page:** 1

<div class="post-metadata">

**Author:** ![alenk](https://avatars.discourse-cdn.com/v4/letter/a/ebca7d/32.png) [@alenk](https://forum.manager.io/u/alenk)\
**Post date:** [January 19, 2014, 1:07pm UTC](https://forum.manager.io/t/how-to-account-for-corporate-tax/390/1 "2014-01-19T13:07:33Z")

</div>

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?

---

<div class="post-metadata">

**Author:** ![lubos](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/lubos/32/62798_2.png) [@lubos](https://forum.manager.io/u/lubos)\
**Post date:** [January 19, 2014, 1:12pm UTC](https://forum.manager.io/t/how-to-account-for-corporate-tax/390/2 "2014-01-19T13:12:58Z")

</div>

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.

---

<div class="post-metadata">

**Author:** ![alenk](https://avatars.discourse-cdn.com/v4/letter/a/ebca7d/32.png) [@alenk](https://forum.manager.io/u/alenk)\
**Post date:** [January 19, 2014, 1:25pm UTC](https://forum.manager.io/t/how-to-account-for-corporate-tax/390/3 "2014-01-19T13:25:35Z")

</div>

Any way on showing this as a separate in the profit and loss statement?

Example:

```
Earnings Before Income Tax 10000
Income Tax 2000
Net Earnings 8000

```

---

<div class="post-metadata">

**Author:** ![lubos](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/lubos/32/62798_2.png) [@lubos](https://forum.manager.io/u/lubos)\
**Post date:** [January 19, 2014, 2:02pm UTC](https://forum.manager.io/t/how-to-account-for-corporate-tax/390/4 "2014-01-19T14:02:54Z")

</div>

Not until `Multi-step Profit & Loss Statement` is implemented which is roughly 2-3 months away.

---

<div class="post-metadata">

**Author:** ![alenk](https://avatars.discourse-cdn.com/v4/letter/a/ebca7d/32.png) [@alenk](https://forum.manager.io/u/alenk)\
**Post date:** [January 19, 2014, 3:17pm UTC](https://forum.manager.io/t/how-to-account-for-corporate-tax/390/5 "2014-01-19T15:17:10Z")

</div>

Thanks for the effort! Great Job!

---

<div class="post-metadata">

**Author:** ![Ealfardan](https://sea1.discourse-cdn.com/flex019/user_avatar/forum.manager.io/ealfardan/32/63166_2.png) [@Ealfardan](https://forum.manager.io/u/Ealfardan)\
**Post date:** [January 18, 2023, 3:42pm UTC](https://forum.manager.io/t/how-to-account-for-corporate-tax/390/6 "2023-01-18T15:42:08Z")

</div>