No it is not a trick. Accounting practice aims to record events as transaction at times according to a number of accounting principles and rules. If you are required to use accrual accounting, it would be legitimate to record the tax as an expense when the income that produces that liability is earned. If you are not required to use accrual accounting then you do not want to record the tax as an expense until you actually pay it which is why the credit to the liability account is matched with a debit to an equity account which makes a provision for paying tax. The creation of the liability when you earn income is still reducing you equity in either case.
Most accounting practice is aimed at recording financial events as they occur in real life. All Expense accounts are actually accounts in Equity but accountants distinguish between events which occur in the current accounting period (which may be a calendar year , a financial year, six monthly, quarterly or monthly depending generally on requirements to report to financial authorities, but usually annually) by creating temporary equity accounts which are given the account types/names of Income and Expenses. In traditional accounting practice they are cleared to equity at the end of the year, i.e. transactions are created which reset the Income and Expense account balances to 0 and transfer the balances to equity. For a business, this is the profit or loss for the accounting period. GnuCash has a closing procedure but this procedure is largely a hangover from accounting done with pen and paper in ledgers. Gnucash's reports produce the correct reports for an accounting period without having to "close the books" formally and closing the books can produce some unwanted effects in the reports. These are generally fixed when they are discoverd so that either approach works. In business accounting, the calculation of tax traditionally takes place after the books have been closed to an Equity:Retained Earnings account and the payment of tax is often recorded against the retained earnings rather than against an Expense account (as are the payments of dividends to shareholders and other distributions of the profits of the business to the participants). David ----- David Cousens -- Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
