[GNC] corporate profit tax ........... where to put

[Karl May]

Hello Jim,

Thank you for your response.

What I would do on paper I already lined out in my first email: equity-
liability swap. For this to happen there must be a an "approachable" equity 
account in gnucash, which from my understanding will only show a value if the 
"books are closed".

I.E. closing Income & Expense for the financial year, calculate profit and tax, 
book profit after tax into Equity, book tax on profit into liabilities, pay tax 
by reducing financial assets and liabilities.

However, "closing books" is discouraged as it interferes with the reporting 
features.

Further, IMHO one cannot put the profit tax under "Expenses" as they would turn 
up as cost in the P & L ......... catch 22 (except I deliberately de-select 
that account, which appears to be a crutch)

Due the gnucash discouraging "closing books" the accounting questions is a 
GnuCash questions.

Best 

On Monday, 8 May 2023 17:06:47 AEST Jim DeLaHunt wrote:
> Hello, Karl:
> 
> This sounds like an accounting question to me, not a GnuCash question? 
> How would your account advise you to track these transactions if you
> were using a pen and paper accounting book? You can do it the same way
> in GnuCash.
> 
> I am a bit surprised by your statement, "that gnucash has no separate
> Equity account". I see a top-level account "Equity" in my Chart of
> Accounts, and a whole tree of other accounts below it. Also, when I pay
> tax, I involve an account of type Expense for the transaction, e.g. an
> account like
>      Expense:My Business:Tax:Income Tax
> 
> I understand that accounts of Expense and Income are special cases of
> Equity accounts. But that too is an accounting question, not a GnuCash
> question.
> 
> I hope this helps,
>      —Jim DeLaHunt
> 
> On 2023-05-07 23:37, Karl May wrote:
> > Hi,
> > 
> > I am wondering where to put the tax on corporate profit.
> > 
> > My understanding from accounting training is:
> > 
> > 1) As long as not paid it would swap between Equity and Liability, i.e. 
the
> > equity shrinks by the tax amount and the liabilities increase by the tax
> > amount.
> > 
> > 2) At pay date it would be an asset-liability decrease, i.e. financial 
assets
> > and liabilities shrink by the tax amount.
> > 
> > Now ......... I understand that gnucash has no separate Equity account, at
> > least as long as the books are not closed. So how to book step 1)?
> > 
> > Thanks and best regards
> > 
> > Karl
> > 
> > 
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