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Hello Chris.
Need your help to tackle a question.
20×4
Deferred tax =$500
Current tax payable=$120020×5
Deferred tax = $200
Current tax payable=100Net tax credit in the income statement is $50.
-The answer for tax paid is $1350. In calculating the tax paid, the net tax credit has been deducted, that is, has been debited.
-Could you explain why? Shouldn’t this tax credit been credit; increasing the tax payable for the year?
Thanks.
Hi,
The net tax credit is saying that instead of there being a tax expense there is a tax saving. A tax expense would be recorded as a credit entry on the tax payable account, whilst the tax credit would be the opposite and therefore shown on the debit side. Draw it out and see how you get on.
Thanks
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