Journal Entry to record overpayment

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Jan 27, 2017
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Hello Everyone,

I am trying to figure out the correct journal entry for an overpayment -

Not only an overpayment - but the refund is applied to next year corporate tax deposit -

the entry that was made is this:

Income Tax Payable : d. xxxx
Corporate tax deposit cr. xxxx

I think this was wrong, because it makes the amount we have deposited over the year lower than we did (because of the credit to corporate tax deposit , which is an asset account)

The way I am thinking is more like this:

Cash: d xxxx (refund)
income tax expense: cr. XXX

Corporate tax deposit: d. XXX
Cash cr. XXX (apply the overpayment)

the difference in these two entries is that in one case we debt corporate tax deposit, in the other we credit.

Thanks
 
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