Question

Each month, a corporation will accrue income taxes based on the month's earnings. to record the income tax for the month, the company will debit the income tax expense account and credit the ____ account.

multiple choice
A. income payable
B. cash
C. tax expense
D. income taxes payable

Answer 1

To record monthly income tax, a corporation debits the income tax expense account and credits the income taxes payable account, which is a liability on the balance sheet indicating owed taxes that are not yet paid. The correct answer is option d

Step-by-step explanation:

When a corporation accumulates income taxes based on the month's earnings, it records the income taxes accrued through a journal entry. This involves debiting the income tax expense account, which appears on the income statement and reflects the amount of taxes the corporation owes for that period based on its earnings. The credit is then made to an account that represents the liability the corporation has incurred but not yet paid.

The correct account for this credit entry is the income taxes payable account, which is a liability account on the balance sheet showing the amount of income taxes that are due to the government but have not yet been paid by the corporation. Therefore, the full entry to record the income tax for the month would be to debit the income tax expense account and credit the income taxes payable account.

In summary, the answer to the student's question, "To record the income tax for the month, the company will debit the income tax expense account and credit the ____ account," is D. income taxes payable.