Question: I have used MYOB in the past, and am used to the system where tax paid was in 9-xxxx Other Expenses. I have just bought Business Basics as our new accounts are simpler, and I have discovered that there is no longer Other Expenses category. My question is, how do I enter my income tax payment transaction.
Answer: The coding of income tax transactions is slightly more complicated if you want to get the accounting really correct. If your company is paying provisional tax then the easiest place to put it is in an asset account called Income Tax Paid. Create this account under the Current Asset heading. Your accountant will calculate your final tax for the year and produce a final Profit & Loss statement that shows the Income Tax Expense for the year (not necessarily what was paid), and a Balance Sheet that shows either a Tax Refund Due (current asset) or Provision for Tax to be paid (current liability.) Please note that if your business is paying for your own personal income tax, then the payment should be coded to Shareholder Drawings. It is important to differentiate between the two types of tax payment!