Is income tax expense on the balance sheet?
Yes, income tax expense appears on the income statement, not the balance sheet. This is because income tax expense represents the amount of taxes owed based on a company’s taxable income for a specific period.
Related FAQs:
1. Is income tax expense the same as income tax payable?
No, income tax expense is the amount of taxes owed based on taxable income, while income tax payable is the actual amount of taxes that a company owes to the tax authorities.
2. How is income tax expense calculated?
Income tax expense is calculated by applying the applicable tax rate to the taxable income of a company for a specific period.
3. Where does income tax expense appear in financial statements?
Income tax expense appears on the income statement as a line item, separate from other expenses.
4. Can income tax expense be negative?
Yes, income tax expense can be negative if a company has tax credits or deductions that exceed its taxable income.
5. How does income tax expense affect a company’s net income?
Income tax expense reduces a company’s net income by the amount of taxes owed, resulting in a lower reported profit.
6. Why is income tax expense important for investors?
Income tax expense provides investors with insights into the tax obligations of a company, which can impact its profitability and cash flow.
7. What are deferred tax assets and liabilities?
Deferred tax assets and liabilities arise from the differences between taxable income and financial income, which can affect future tax obligations.
8. How are deferred tax assets and liabilities reported on the balance sheet?
Deferred tax assets and liabilities are reported on the balance sheet as assets or liabilities, depending on their tax impact on future periods.
9. Can a company have a high income tax expense and still be profitable?
Yes, a company can have a high income tax expense due to factors like non-cash charges or temporary differences between taxable and financial income, while still being profitable.
10. How does tax reform impact income tax expense?
Tax reform can change the applicable tax rates or tax laws, affecting a company’s income tax expense and overall financial performance.
11. What is the relationship between income tax expense and effective tax rate?
Income tax expense is used to calculate the effective tax rate, which represents the percentage of pre-tax income that is paid in taxes.
12. How do changes in tax laws impact income tax expense reporting?
Changes in tax laws can impact income tax expense reporting by altering the tax rates, deductions, credits available to companies, leading to adjustments in tax provisions and liabilities.