October 30, 2016 admin

Prepaid Expenses—Taxes—Other

Assets

PREPAID EXPENSES—TAXES—OTHER ASSET ACCOUNT
1550

ACCOUNT EXPLANATION
Taxes, other than income, paid in advance that apply to future accounting periods. Includes real estate taxes, personal property taxes, franchise fees, gross receipts taxes, and intangibles taxes.
TRANSACTIONS
  Jrnl. Dr. Cr.
  Payment of business license paid for one year in advance CD
    Prepaid Taxes—Other 1550
      Cash in Bank—General 1001
             
  Monthly write-off of prepaid business license SE
    Taxes—Excluding Real Estate & Income 8540
      Prepaid Taxes—Other 1550
             
   Monthly write-off of prepaid property taxes SE
    Taxes—Real Estate 8400
      Prepaid Taxes—Real Estate 1570
COMMENTS
  • The amounts applicable to Real Estate Taxes should be recorded in Sub Account 1570, Prepaid Real Estate.
  • Real and personal property taxes become liabilities on dates specified by the applicable government authority. Various accounting methods are permissible in recording these taxes. Accounting advice and tax counsel should be obtained as to the method adopted for book and/or tax purposes and it should be followed consistently from year to year.
  • A subsidiary record, such as Form FMC 61, Prepaid and Accrued Expense Schedule, should support this account and should be used in computing monthly write-offs to expense.