Tax as a liability AND expense?

superwizon

Sorry if this sounds like a really silly question, but can someone explain to me why taxation goes as an expense in the income statement aswell as a liability in the sofp? Normally things just click with me but I just don't get this, I thought if someone could put a reason to it, it might make sense in my head.

Thanks

coojee

superwizon wrote: »

Sorry if this sounds like a really silly question, but can someone explain to me why taxation goes as an expense in the income statement aswell as a liability in the sofp? Normally things just click with me but I just don't get this, I thought if someone could put a reason to it, it might make sense in my head.

Thanks

Because it's not paid until after the year end. The entries are DR Tax expense and CR Tax liability. Then when it's paid in the following year it's DR Tax liability and CR Bank.

welshwizard

Just think back to AP1!

It's just like an accrual, isn't it?