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| Corporate Practice bd |
Source Tax & VAT Payable on the Balance Sheet
Source Tax (Withholding Tax) and Value Added Tax (VAT) Payable are important liabilities that need to be accurately recorded on a company's balance sheet. These are typically reported under current liabilities as they are expected to be settled within the financial year.
Source Tax (Withholding Tax):
Source tax, also known as withholding tax, is an amount that an employer or payer withholds from payments such as salaries, contractor payments, or dividends to remit to the tax authorities. The payer deducts these taxes at the source before making the payment to the recipient.
VAT Payable:
VAT payable is the amount of value-added tax a company owes to the government. It is the difference between the VAT collected from customers (output VAT) and the VAT paid on purchases (input VAT). If output VAT exceeds input VAT, the company owes the difference to the tax authorities.
Presentation on the Balance Sheet:
Both source tax and VAT payable are recorded as current liabilities on the balance sheet, as they are typically due within the current financial period.
Here are some Source Tax & VAT Payable on the Balance Sheet items are includes-
Source Tax & VAT Payable on the Balance Sheet:
Advance income tax deduction (Employees) *****
Parties Income Tax Deduction *****
Parties VAT Deduction *****
Summary:
Properly accounting for source tax and VAT payable ensures that a company complies with tax regulations and accurately reports its liabilities. These amounts are recorded under current liabilities on the balance sheet, reflecting obligations that are typically due within the current financial period. Understanding the journal entries and presentation on the balance sheet is crucial for accurate financial reporting and compliance.