Accounting journal entries for estimated income tax payable, actual tax and penalty on underestimate tax?
Actual tax payable 340000
Less: Margin of Error (30% x $340k) (102000)
Excess over $102000 58000
Penalty (10% x $58000) 5800
The Company has tax credit/refund brought forward from previous year amounting to $10000. So the Company should only pay $150000 additional income tax plus penalty on underestimation of $5800.
Now let's proceed to accounting journal entries to record such transactions. I understand that accounting journal entry to record the payment of monthly tax instalment is (pls correct me if I am wrong):
DR. Provision of Income Tax (Current Asset - Prepayment)
But what is the journal entries to record the actual income tax payable, the tax credit/refund and the penalty ? Pls help!!