How to enter tax liability?

[Mike or Penny Novack]

jcard21 xxxxxxx wrote:

>On Thu, Mar 6, 2014 at 9:02 AM, Jack Tannery <jacktannery at yahoo.ie> wrote:
>  
>
>>I am new to gnucash and
>>trying to enter my last three years' business accounts into the programme and
>>produce sensible reports.
>>
>>I wish to enter my
>>income tax liability for 2011 (which was paid in 2012) as a liability
>>to appear on the 2011 balance sheet. How do I do this? I tried
>>creating a new account under LIABILITIES called 'Business Income Tax'
>>and adding a liability here of the total that I owe dated 31/12/2011,
>>which I was going to later pay off from my bank account in 2012.
>>However for some reason GnuCash isn't letting me do this (it inserts
>>a second entry below, offsetting it).
>>
>>What am I missing?
>>
>>JT.
>>    
>>
>
>Welcome to double-entry bookkeeping!
>
>  
>
We can give you more help that that. You say that you entered a 
transaction where one side of the transaction was an account for tax 
liability. What account did you use for the other side of that 
transaction? Presumably an account of type expense with a name like 
"taxes". That's what the previous person meant by "welcome to double 
entry bookkeeping". EVERY transaction has two sides to it.

What you are trying to do here would be correct if you are keeping your 
books on the 'accrual basis". But if you are keeping books on the "cash 
basis" then the tax expense is when you pay it in 2012.

BTW, the tenses were a bit confusing at first. You are entering OLD DATA 
moving books form other system to gnucash. You mean this was 2011 taxes 
owed and you DID pay them in 2012.

Michael D Novack

PS: If this talk about every transaction having two sides then you 
indeed have to begin with "fundamentals of double entry bookkeeping". 
What were you using before? For a business no less.