[GNC] Contingency Funds was: Re: How to record Personal income tax ?

[David Cousens]

You first have to adjust the amount of the Liability and the Expense :Tax
accounts so their balances are each 10000. To do this you credit the
Expense:tax and debit the Liability:Tax account each by 2000. After this the
liability and Expense accounts match what you will actually have to pay.

then you make the payment and transfer the money or write a check to the
governement Asset:Bank:Checking  is credited by 10000 and the Liability:Tax
is debited by 10000 so the balance of  Liability:Tax after the transaction
to pay the tax is 0 - having paid the tax you no longer have a liability but
the balance of the Expense:Tax account is still  10000 the amount of tax you
have now actually paid.

so no the P&L report at the end of the year for the year should show an
Expense:Tax of 10000.

If you are debiting it at $1000 per month for 12 months its balance will be
12000 and if you then credit it for the $2000 of tax you don't have to pay,
the balance in the account will be 10000 not 2000 after that transaction. 

For an expense account a debit increases the balance and a credit decreases
the balance.

While I am happy to help, the function of the User group is not to teach
people accounting but how to do their accounting using GnuCash. You may find
working through the following website useful
https://www.accountingcoach.com/ for learning basic accounting skills.

David 




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David Cousens
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