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Corporate income taxes expense also needs to be accrued for BDCC. In most jurisdictions, a corporation is taxed as an entity separate from its shareholders. For simplicity, assume BDCC’s income tax expense for January 2015 is $500 and that this amount will be paid after the company’s year-end, December 31. The adjusting entry for January is:
When the adjusting entry is posted, the accounts appear as follows:
This adjusting entry enables the company to match the income tax expense accrued in January to the income earned during the same month.
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