Booking the franchise tax
$37.50 accrued each month, then cleared by the March 1 payment.
The franchise tax isn't measured on income, so it isn't income tax expense. It's an operating expense, a cost of keeping the company alive, and it belongs to the year it's for, not the March it's paid in. So from 2027 Northwind accrues a twelfth of the full-year bill each month, $37.50, into accrued liabilities, and the March payment clears the accrual.
Accrue Delaware franchise tax and annual report fee
| Account | Debit | Credit |
|---|---|---|
| Franchise tax and fees (operating expense) | 37.50 | |
| 2200Accrued liabilities | 37.50 | |
| Balanced | 37.50 | 37.50 |
Each month end of 2027: a twelfth of the full-year bill.
Delaware franchise tax and annual report for 2027
| Account | Debit | Credit |
|---|---|---|
| 2200Accrued liabilities | 450.00 | |
| 1000Cash — operating | 450.00 | |
| Balanced | 450.00 | 450.00 |
The annual report filed and the tax paid: the accrual is cleared.
The words this page teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
See also
- Schedules, accruals & roll-forwardsEvery balance sheet account needs a schedule behind it, and the schedule has to tie to the GL. Most accounting products ship a ledger and statements and leave the schedules in spreadsheets. That handoff is where closes break.
- Journal entry for accrued expensesAt month-end, debit the expense and credit Accrued expenses for work received but not yet billed. Reverse the accrual on the first day of the next month, then book the vendor's bill as usual when it arrives.