accountant

How do I record tax on profit?

Taxes on profits can be recorded by creating an expense with Tax Payable as the expense account. To create an expense:

Go to the Purchases tab on the left sidebar and select Expenses.
Create an expense by clicking + New.
Select Tax Payable under Other Current Liability as the Expense Account.
Enter the tax amount.

Insight: To get the tax amount, run the Profit & Loss report for the particular period and calculate the tax from the net profit.

Select the Paid Through account. This can be the account from which you want the tax to be deducted.
Enter all the other necessary details.
Click Save.

An expense recording the tax on profit will be created.

Note: If you have configured your tax settings to track taxes under separate accounts, then you will have to create a Manual Journal with Output Tax as the Debit account and the account from where you want the tax amount to be deducted as the Credit account, to record a tax amount on the profit.

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