Could someone please tell me the entries needed to deal with an income tax refund. I have just started doing bookkeeping for a recently self employed artist - no tax was paid out last year - doesn't earn enough. Have received income tax refund straight into bank a/c. What are the entries on the ledger. Would it appear on a balance sheet - if so - where.
The first posting is to Dr Bank with the amount paid in and Cr Owners Capital A/c. This puts it on the books and accounts for the deposit in the bank account.
If the money is to be withdrawn to a personal account reverse it out with a second posting CR bank and Dr Owners Capital A/c. Otherwise it can just stay in there as new capital introduced
As you say, in this case it will appear on the balance sheet in the financed by section as Capital along with any other capital the owner has put in. As carole pointed out, don't confuse it with profit
The entries for dealing with income tax refund include crediting the refund amount to the taxpayer's bank account and creating a journal entry to reflect the refund.
