Net income or loss is determined for corporations in a similar fashion to other business enterprises. Corporations are required to make advance quarterly payments for income taxes. These payments are only estimates, and adjustments are necessary at the end of the year. If advance payments exceed the tax liability, a receivable account is debited. If tax liabilities exceed advance payments, a payable account is credited. Tax authorities are permitted to review income tax returns up to three years after they have been filed. Because income tax expenses are determined on net income, they are usually the last expense reported on the income statement.
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CORPORATE EARNINGS AND INCOME TAXES
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