270 Prepaid Taxes
Assets
Prepaid Expenses
Synopsis
Account 270 is established to record the amount of Taxes that have been paid in advance.
|
Debits |
Credits |
|
|
Example 1
Record the $45,750 payment of real estate taxes.
Journal: Cash Disbursements
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Entry: |
|
Debit |
Credit |
|
Account 270 |
Prepaid Taxes |
$45,750 |
|
|
Account 202 |
Cash in Bank |
|
$45,750 |
Example 2
Record the monthly expense of $3,813 for the real estate taxes paid in advance.
Journal: Standard Entries Journal
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Entry: |
|
Debit |
Credit |
|
Account 084-01 |
Taxes – Real Estate – New Vehicle Department |
$1,335 |
|
|
Account 084-02 |
Taxes – Real Estate – Used Vehicle Department |
$763 |
|
|
Account 084-03 |
Taxes – Real Estate – Lease & Rental Department |
$75 |
|
|
Account 084-05 |
Taxes – Real Estate – Mechanical Department |
$763 |
|
|
Account 084-06 |
Taxes – Real Estate – Body Shop Department |
$267 |
|
|
Account 084-07 |
Taxes – Real Estate – Parts & Accessories Department |
$419 |
|
|
Account 084-09 |
Taxes – Real Estate – General & Administrative |
$191 |
|
|
Account 270 |
Prepaid Taxes |
|
$3,813 |
Comments
A debit balance represents the unexpired portion of taxes paid in advance, such as:
a. Real Estate taxes
b. Personal property taxes
The total amount of the Tax Payment should be pro-rated over the number of months for which the Tax is assessed. The pro-rated monthly provision of the Tax should be written off each month by crediting this account with the monthly provision and debiting Account 084, Taxes – Real Estate, Account 089, Taxes - Other, or whichever applies.
Note:
Professional tax and accounting advice should be obtained regarding the proper handling of tax payments.