Income taxes - part 1

In this lesson

1. 0:00 Accounting for taxation overview
2. 1:03 Current tax explained simply
3. 2:51 Current tax estimation example
4. 4:20 Adjusting prior year estimates
5. 5:35 Double entry for current tax
6. 7:34 Recording tax adjustments in year two

About this lesson

Through a worked example, you'll see the double entries needed to recognise the initial tax liability, record the payment in the following period, and adjust for any over or underestimate—all without retrospectively changing prior year figures. This video covers the foundations of current tax accounting, which underpins your understanding of deferred tax (the more heavily tested topic on F2). You'll learn that current tax is simply the tax payable or receivable in the current year, and that companies must estimate this amount before the accounting period ends. The key principle is that when you discover your estimate was wrong, you make a prospective adjustment in the following year rather than going back to correct the prior period. By mastering these mechanics now, you'll be well prepared to tackle the more complex deferred tax calculations that follow.

Duration: 9m