Recording corporate income tax

In this lesson

1. 0:00 Corporate income tax accounting overview
2. 1:07 Four-step process for recording tax
3. 3:01 Worked example: Douglas Limited
4. 6:23 Over and underestimating tax liability
5. 8:05 Worked example: Laxey Limited overestimate

About this lesson

This video walks you through the four-step process: estimating the liability, paying the actual amount, releasing residual differences, and repeating for the next period. You'll see how under or overestimates flow through the statement of profit and loss, and why the treatment mirrors that of provisions. By the end, you'll be able to handle tax adjustments confidently in both simple and complex scenarios. The video uses two worked examples to show the process in action. In the first, Douglas Limited underestimates its tax liability, requiring an additional charge in the following year. In the second, Laxey Limited overestimates, resulting in a credit adjustment. You'll see exactly how each journal entry is recorded, where amounts appear in the financial statements, and crucially, why residual amounts must be cleared through the profit and loss account rather than going back to adjust prior-year figures. This content is essential for TX and ATX candidates, and anyone studying Financial Reporting or Advanced Financial Reporting. Understanding tax provisioning and adjustments is a core skill for exam success and real-world practice.

Duration: 11m