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EBFinancials
December 31, 2018

Balance Sheet - Accrued liabilities

  • December 31, 2018
  • 1 reply
  • 0 views

Hello,

In the Accrued Liabilities line item under Current Liabilities:

1.) Should Sales Tax (on sales that have been already made)  that are still due be included?
2.) If Income Taxes are included in this line item - Should the number here be the total of prepaid estimated taxes that were paid in the last tax year, as the current year's taxes are still not final?

 

    1 reply

    john-pero
    john-pero
    January 4, 2019

    1. Yes, except sales tax liability and payroll tax liability have each their own account. Short answer is that any unpaid but charged liability should display on balance sheet

     

    2. Income taxes can ONLY be a liability once calculated and posted AND ONLY if you are a Schedule C Corporation. No other business entity incurs or pays income tax

     

    Presuming you are a corporation any prepaid income tax deposits made would be a Current Asset.

     

    If you are a pass through entity then taxes paid ahead are Owner Draw

    qbteachmt
    qbteachmt
    January 4, 2019

    If this is a C Corp, any Prepaid income taxes are Asset, not Liability. You Prepaid = they have your funds and don't have the right to keep it, yet.

     

    For any other entity type, Income taxes are Personal and never tracked in the business.

    T
    Teri11_2
    January 30, 2019

    One exception would be State Franchise Taxes (also often referred to as income taxes since they are based on income).  These are an expense recorded on S Corp books annually.  In CA, we must pay $800 by March 15 each year for the upcoming year even with zero revenue and that is an expense.  

     

    Since at year end we owe 1.5% of net income, most companies must pre-pay estimate quarterly to avoid penalties and interest. These payments are booked as Prepaid expense on balance sheet until year-end when the amount owed is known and that amount is then moved to an expense on P&L.

     

    Any overpayment can be refunded or remain in prepaid account to apply to the following year.

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