Question

How do taxes affect:

1. Personal Budget
2. Income Statement
3. Balance Sheet

Answer 1

Taxes are a huge outflow and hence the personal budget should be adjusted to incorporate this outflow. So the personal budget has to be increased so as to accommodate the tax expenses.

Taxes are to be shown as an expense in the income statement thus reducing the profitability of the business.

Taxes are shown on a balance sheet if they remain unpaid. Hence taxes payable are grouped under current liabilities. Deferred income taxes are also shown on the balance sheet