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  • Points To Remember

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    Haider Aadil
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    For sole proprietorships and partnerships, income tax should not be debited as an expense because the owners, not the business, pay the tax. For corporations, income tax is an expenditure that is debited to the income tax account and credited to the cash account. Provisions are taken out of profits, reducing profits, and all provisions represent future liabilities that are debited to the profit and loss account and credited to the provision account.

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    Points to Remember

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    For sole proprietorships and partnerships, income tax should not be debited as an expense because the owners, not the business, pay the tax. For corporations, income tax is an expenditure that is debited to the income tax account and credited to the cash account. Provisions are taken out of profits, reducing profits, and all provisions represent future liabilities that are debited to the profit and loss account and credited to the provision account.

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    6 views1 page

    Points To Remember

    Uploaded by

    Haider Aadil
    For sole proprietorships and partnerships, income tax should not be debited as an expense because the owners, not the business, pay the tax. For corporations, income tax is an expenditure that is debited to the income tax account and credited to the cash account. Provisions are taken out of profits, reducing profits, and all provisions represent future liabilities that are debited to the profit and loss account and credited to the provision account.

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    Attribution Non-Commercial (BY-NC)
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     For Sole Proprietor and Partnership it is wrong to Debit Income Tax as expense because it is not an expense for them

    as only owners are payers of tax and not the business. For corporation it is an expenditure{Income Tax a/c (Debit),Cash a/c (Credit)}.  Provisions are taken out of profits so reduce the profits and all provisions are future liabilities. {P & L a/c (Debit), Provision (Credit)}. 

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