Corporation Tax Payment Process in Zumzum Financials

Zumzum Financials Knowledge Base

    How to Record a Corporation Tax Payment in Zumzum Financials

    At your year end, your accountants or auditors will calculate the amount of corporation tax your company owes. Generally, corporation tax is generally paid in arrears. Once you have calculated and agreed your Corporation Tax Amount, you will be ready to record the transaction in Zumzum Financials.

    Although corporation tax should appear on the Profit and Loss report, after the net profit figure, Zumzum Financials does not support this capability. Corporation Tax is recorded on the balance sheet in Zumzum Financials, where it will remain until it is paid.

    We recommend the Corporation Tax value in the Capital and Reserve section of the Balance Sheet report be moved to the Retained Earnings/Profit nominal code.

    Create the Corporation Tax nominal codes in your chart of accounts.

    Before you record Corporation Tax in Zumzum Financials, you should create the required nominal codes.

    If you already have the following nominal codes in your chart of accounts, then you may move the next sections, otherwise, you should create new nominal codes. Please consult with your accounting to confirm if you need to create new nominal codes.

    Follow the steps in article on how to create a Nominal Account to add new nominal accounts. 

    Type Nominal Category Sub Category Nominal account Name Nominal Account Code
    Balance Sheet Long Term Liabilities Creditors: Long term Corporation Tax 2320
    Balance Sheet Current Liabilities Creditors: Short Term Corporation Tax Liability 2150

     

    Once you have completed this step and have all the necessary nominal codes, please proceed to the next step.

    Record the Corporation Tax as a manual journal entry.

    Use a manual journal entry to record the Corporation Tax amoung in Zumzum Financials. When your manual journal entry is posted, the value appears on the Liability and Capital and Reserves section of your balance sheet report.

    Below is an example of the proposed Corporation Tax journal entry using the value of 10000.

    N/C Name Details VAT Debit Credit
    2320 Corporation Tax Corporation Tax 2016 No Vat 10000.00
    2150 Corporation Tax Liability Corporation Tax 2016 No VAT 10000.00

    Once you have posted your journal entry for the amount of Corporation Tax to be paid, please review your Trial Balance and Balance Sheet to confirm the results are as you expected.

    You are now ready to proceed to the stage of paying your Corporation Tax.

    Pay the Corporation Tax with a Bank Payment transaction

    Once you are ready to pay the Corporation, you should to post a Bank Payment transaction to the Corporation Tax Liability nominal code. This transaction will reduce the balance of the bank account and also the balance of the Corporation Tax Liability nominal code.

    Below is an example of you paying a Corporation Tax of 10000.

    Bank Date N/C Details Net T/C Tax
    1200 Payment date 2150 Payment of Tax 10000.00 T9 0.00

    Once you have posted your Bank Payment, please review your Bank Account Balance, Trial Balance and Balance sheet reports to confirm the outcome is as you expected.

    The Balance of theCorporation Tax Liability account should now be zero.   

    Manually journal the value from the Corporation Tax nominal account to your Retained Earnings/Profit nominal code.

    If you review your Balance Sheet report, the balance remains on the Corporation Tax nominal code (e.g. 3201).  You may wish to transfer the balance from the Corporation Tax nominal account to your Retained Earning/Profit nominal account on your Balance Sheet. You should post this transaction on the date of the start of the new fiscal year to ensure the Corporation Tax balance only relates to the new fiscal year.  

    N/C Name Details VAT Debit Credit
    3200 Retained Earnings/Profit Corporation Tax 2016 No Vat 10000.00
    3201 Corporation Tax Corporation Tax 2016 No VAT 10000.00

    You have now successfully completed the process of manually transferring the balance of the Corporation Tax nominal code to the Retained Earning/Profit nominal code. Please review your Balance Sheet report to confirm your outcome is as expected.

     

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