Expert: Ed McFarland - 12/16/2004

Question
Is the final tax payment an expense item in P&L or do I show it in the balance sheet? I guess I am asking that final income tax is claculated on income excluding the income tax payable?
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Followup To
Question -
I am employed but also have some additional income from some consultancy work I do in private. I do this work in a proprietership company that I own.  Each quarter, I have been paying estimated income tax calculated on an anticipated income basis. My questions is, how is the estimated tax paid reflected/treated in the books of account? Do I show these tax payments as an expense item in my business Profit and Loss statement?
Please advise. Thanks!
Answer -
I would expect you are taking the tax expense and showing pre paid taxes as an asset.

At the year end, when the tax bill comes due, with adjusting entries to show zero prepaid tax and adjusting the tax expense for either the final payment or refund.

Answer
The tax comes off as an expense, through the Income Statement after gross margin it is in the next set of expenses.

The asset, prepaid tax, is just whatever is sent to the service. On a year end statement it would reflect what might have been sent in for your Q1 or probably zero.