Taxes Payable (or ‘Accrued Taxes’) account is comprised of
taxes that must be paid to the government within one year. It shows up when the
company has received its tax bill but has put off paying it for the time being.
The taxes are calculated on the company's net income according to its corporate
tax rate. If a company is due to receive a tax benefit from its respective
revenue agency, the amount of income tax payable will decrease.
Like Accounts Payable, this account requires careful
management to make sure that you pay your taxes right on time. Not too soon –
to free cash for profitable investments, but not too late – to avoid fines and
other trouble with the tax man (or woman).
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