Income Tax Expense
Definition: Current and deferred income tax
Scope:ModerateDifficulty:Moderate
Current and deferred income tax
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Record tax provision | ||
| Current tax $40,000 + deferred tax $5,000. | ||
| Income Tax ExpenseExpense+ | $45,000 | |
| Income Tax PayableLiability+ | $40,000 | |
| Deferred Tax Liability | $5,000 | |
| Total expense = current + deferred portions. | ||
| 2. Pay current taxes | ||
| Remit $40,000. | ||
| Income Tax PayableLiability− | $40,000 | |
| CashAsset− | $40,000 | |
| Current liability settled. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Income Tax ExpenseIncome Tax ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$45,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$45,000.00
Income Tax PayableIncome Tax PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$40,000.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$40,000.00
Normal bal. ▶
$0.00
Deferred Tax LiabilityDeferred Tax LiabilityAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$5,000.00
$5,000.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$40,000.00
$40,000.00
DurationN/A
Related Reports
- Income Statement(Primary — Below pretax income)
- Tax Provision Workpaper ASC 740(Primary — Current + deferred)
- Effective Tax Rate Reconciliation(Primary — ETR walkthrough)
External Links
- Income tax — Wikipedia