• From: USA
  • Registered: 02/05/2018
  • Posts: 37

Topic: Closing equity accounts for start of new year

I have two equity accounts for recording federal and state taxes paid throughout the year.  During the year end closing for 2023 these accounts were not zeroed out.  It seems logical to me that these accounts should have a zero balance for the new year, but I'm not sure.  If it is OK to zero these accounts what is the appropriate GL account to use for the credit entry?

  • From: UAE, Abu Dhabi
  • Registered: 01/03/2024
  • Posts: 2

Re: Closing equity accounts for start of new year

Equity Accounts are only SHARE CAPITAL, RETAINED EARNINGS (including Current year results profit or loss), and ANY LEGAL OR STATUTORY RESERVES.

Federal Taxes / State Taxes are paid against either any liability for the previous years, a deposit of Withholding tax deducted, State taxes on income generated, all of these taxes have nothing to do with Equity.

It would help if you created the provision against these taxes and then debit the payments against those provisions, this way they will be zeroed out at the year-end.

  • rafat
  • Senior Member
  • Offline
  • From: UAE, Dubai
  • Registered: 11/28/2017
  • Posts: 540

Re: Closing equity accounts for start of new year

IMHO the best way to do what @diventi.enterprises needs is to follow the wiki as in
https://frontaccounting.com/fawiki/index.php?n=Main.TaxSystem
Study whats in Using the Tax System. You will find what you looking for with an example.

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