Which balance sheet line item is the counterpart to 'Accrued Expenses' but for taxes?

Which balance sheet line item is the counterpart to 'Accrued Expenses' but for taxes?

• A. Income Taxes Payable
• B. Deferred Tax Asset
• C. Tax Refund Receivable
• D. Tax Revenue

Answer: (A)

Accrued expenses create a current liability on the balance sheet for costs that have been incurred but not yet paid. Taxes follow the same pattern: if taxes are recognized as an expense but not yet paid to the tax authority, the corresponding line item on the balance sheet is income taxes payable. This shows the amount owed for the current period. Deferred tax asset is not correct because it represents a future tax benefit (an asset), not a current liability. Tax refund receivable is an asset that shows potential cash to be received due to overpayment, not a liability. Tax revenue is income, not a balance sheet item, so it doesn’t fit as the liability counterpart.

Accrued expenses create a current liability on the balance sheet for costs that have been incurred but not yet paid. Taxes follow the same pattern: if taxes are recognized as an expense but not yet paid to the tax authority, the corresponding line item on the balance sheet is income taxes payable. This shows the amount owed for the current period.

Deferred tax asset is not correct because it represents a future tax benefit (an asset), not a current liability. Tax refund receivable is an asset that shows potential cash to be received due to overpayment, not a liability. Tax revenue is income, not a balance sheet item, so it doesn’t fit as the liability counterpart.