At 30 June 2019, Barry Ltd estimates it will be required to pay income tax expenses of $62 000 during the following financial year. The correct journal entry to provide for this income tax estimate at 30 June 2019 is:

Question

Quizplus · Accepted Answer

The correct way to provide for estimated income tax expenses is to debit Income tax expense account and credit Current tax liability account. This is because the estimated income tax expense is a liability for the company and should be recorded as such in the balance sheet. Options A and B are not correct because income tax expenses should not be recorded in the bank or retained earnings accounts. Option D is also incorrect since it reverses the debit and credit accounts.

At 30 June 2019, Barry Ltd Estimates It Will Be