Income Tax Payable

Definition: Current income tax obligation

Scope:ModerateDifficulty:Moderate

Current income tax obligation

Common Journal Entries
AccountDebitCredit
1. Record income tax liability
Year-end tax liability is $45,000.
Income Tax ExpenseExpense+$45,000
Income Tax PayableLiability+$45,000
Current tax obligation recognized.
2. Pay income taxes
Remit $45,000 to taxing authority.
Income Tax PayableLiability−$45,000
CashAsset−$45,000
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.
$45,000.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$45,000.00
Normal bal. ▶
$0.00
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.
$45,000.00
$45,000.00
DurationShort-Term

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