Recording Corporate Tax Refund

It depends on what has already been posted relating to the period.

Either:

Dr Bank Cr Taxation (P&L A/c)

or

Dr Bank Cr Taxation (Balance Sheet)

Rightly or wrongly I set up my tax installment payments as an expense account. And recorded each months intallment payment as an expense. At the end of the year received a $1000 refund. Having the option of receiving a refund check or applying the $1000 to next years taxes, I made the choice to apply the refund to next years taxes. So cannot run the amount through the bank as no refund was actually received, just a credit. (could, but then the bank transactions are fake...)

Need to somehow move the refund amount from the prior year to this year. So I can credit the tax expense account, but what do I debit?

The offset is Retained Earnings, but you have your debits/credits backward:

- Your refund is reducing your expenses from last year, so your Retained Earnings balance is higher (therefore you CREDIT the account).

- The refund from last year will give you a larger effective balance of tax installments this year, so you DEBIT your tax installment payments account.

For reporting, it'll show up on your balance sheet (Change in Retained Earnings section) as a prior period adjustment.

vcard

You need to work out exactly what your tax charge/refund is for the year. You seem to be talking about cash receipts/payments only.

Your comments are contradictory:

"At the end of the year received a $1000 refund."

"So cannot run the amount through the bank as no refund was actually received, just a credit."

We can't help you if you don't give full information.

Call up your accountant.

Thanks, that worked.