These two words seem to be a bit confusing
Are these two terms (taxes payable and provision for income taxes) interchangeable? Do they generally mean the same thing?
Thanks!
Taxes Payable is a balance sheet account.
Provision for Income Taxes (aka Income Tax Expense) is an income statement account.
They’re not remotely interchangeable.
haha thanks! I meant (provision for income taxes) vs (income tax expense). So they (ITE and Prov for Income taxes) do both mean the same thing?
Also one follow up Taxes Payable are a Balance sheet item? I always thought they were a Tax return item? Sorry if it sounds like a very rudimentary question, but items on the Tax return go on the balance sheet? are they the same thing?
Yes, Yes. A “tax return item”, if I understand this correctly, could be on the Income Statement or the Balance Sheet. You have timing issues and “Book/Tax” differences.
Essentially, yes.
I suspect (Greenman can confirm or refute this) that Provision for Income Taxes is merely an estimate, whereas Income Tax Expense is an actual (i.e., backed by paperwork) number.
A tax return is not a financial statement. The taxes payable from the tax return goes into the Taxes Payable account on the balance sheet.