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Hi,
The example here showed that the “income tax (remaining balance from previous year) $10k”, this is supposed to be a “tax payable account” or expense account in the SOPL? The answer shown in solution is that the taxation expense were added current year provision of $135k+10k, which is very confusing. Anyone can explain the meaning of the $10K? I thought it supposed to be a liability account (ie tax payable).Thanks
Hi,
If they are adding the 10k to the 135k then this will be an under provision from the prior year and effectively a debit balance on the tax account.
The balance will be the amount remaining after accruing for the amount due last year, net of any payment made this year. It is neither a payable or tax expense account and is a hybrid of both, to make life a bit easier. You can find out more in the videos.
Thanks
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