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Established Member

Property taxes paid with liability account, how to record

I have a friend who lives with me and is liable for 1/2 of the taxes on property. I also owe my friend a certain amount of money.  When tax bill comes in, I pay it in full using my personal bank account and want to decrease loan amount that I owe to my friend on 1/2 of the bill.

 

I record my loan on "other current liability" account type.

 

When I record my transaction as a general journal entry  I debit loan account(liability) and credit Taxes(expense) account. But this gives me negative value (bill amount) on a Profit&loss report under Taxes. So I assume I should have credited a different account.

 

But what account I should credit then? An income account?

 

1 Comment
Established Community Backer ***

Re: Property taxes paid with liability account, how to record

your journal entry is correct, debit loan, credit tax expense

 

If tax expense is going negative as a result, then your original payment of the taxes in full did not post to the same tax expense account as it should.