Journal Entry to record overpayment

Discussion in 'General Tax Discussion' started by rfpro, Apr 18, 2017.

  1. rfpro

    rfpro

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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
     
    Last edited: Apr 18, 2017
    rfpro, Apr 18, 2017
    #1
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