Taxes payable

Definition

Taxes payable are current liabilities that a company owes to tax authorities and must be paid within one year. They typically include income taxes, sales taxes, and payroll taxes owed by the business.

5 Must Know Facts For Your Next Test

1. Taxes payable appear on the balance sheet under current liabilities.
2. The amount recorded as taxes payable represents the tax obligations that have been incurred but not yet paid.
3. Failure to pay taxes payable on time can result in penalties and interest charges.
4. Accurate calculation of taxes payable is essential for financial reporting and compliance.
5. Adjustments to taxes payable may occur if there are changes in tax laws or rates.

Review Questions

• Where do taxes payable appear on the financial statements?
• What types of taxes might be included in the 'taxes payable' account?
• What could be the consequences of failing to pay taxes payable on time?

Related terms

Current Liabilities: Obligations that a company expects to settle within one year.

Income Taxes Payable: A specific type of taxes payable related to income earned by a company.

Accrued Expenses: Expenses that have been incurred but not yet paid or recorded through normal invoicing processes.