I Need a little help on how to set up and use a liability account for general excise taxes owed to my state.
I do not pass along the general excise tax to my customers through sales. I simply figure the tax on gross sales at the rate applicable and pay it to the tax agency.
I have set up a account in my Chart of Accounts for GE taxes and surcharges. In the associated register it presents in "red" as a "negative". I do not understand why. Any help with the mechanics of how to set up and use the liability account would be appreciated.
If you are paying the taxes and not collecting from customer, you will need expense account to charge to so this gets included on P&L (Income Statement).
Could you detail how when I compute tax amount to then "Debit Tax expense account" then "Credit Tax Liability account" then when I pay taxes to tax agency how to "Debit Tax liability account" and "Credit cash (bank) account? what are the steps involved to perform each of the things you pointed out?
Thank you in advance for your efforts.
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