The basic entry to provide for company income tax at the end of the financial year is which of the following?

Question

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The entry to record company income tax at the end of the financial year is to debit Income Tax Expense and credit Current Tax Liability. This reflects the amount of income tax owed for that financial year, which is recorded as an expense on the income statement and a liability on the balance sheet. Option A is incorrect because it reverses the debit and credit accounts. Option C is incorrect because it incorrectly records the payment of income tax using retained earnings, which is a component of equity. Option D is incorrect because it records payment of income tax using bank, which is not an appropriate account to use for this transaction.

The Basic Entry to Provide for Company Income Tax at the End