Income Tax Paid

[ayousaf]

Hi, I was just wondering where the actual income tax paid was shown on the financial statements. I’m not sure if it is the income tax expense because this includes deferred taxes (which, by definition, can’t be paid in the current period). I’m inclined to think it is the income taxes payable amount.

From my understanding the journal entries are:

Cr Deferred tax

Cr Income taxes payable

Dr Income tax expense

And when the income tax is paid:

Cr Bank

Dr Income taxes payable

Thanks,

[S2000magician]

@ayousaf

Hi, I was just wondering where the actual income tax paid was shown on the financial statements. I’m not sure if it is the income tax expense because this includes deferred taxes (which, by definition, can’t be paid in the current period). I’m inclined to think it is the income taxes payable amount.

Income taxes paid would show up on the statement of cash flows if you used the direct method for CFO; otherwise, it won’t show up anywhere. Assuming that you pay everything you owe each year, the amount will be the same as what you calculate for income taxes payable.

@ayousaf

From my understanding the journal entries are:

Cr Deferred tax

Cr Income taxes payable

Dr Income tax expense

I’d have put Cr/Dr Deferred taxes, as you could be increasing or decreasing DTAs or DTLs, but you have the idea.

@ayousaf

And when the income tax is paid:

Cr Bank

Dr Income taxes payable

I trust that you meant, “Cash”.

@ayousaf

Thanks,

My pleasure.