Is income tax is operating expense of the business? If not thab why do show in operating activity in cash flow statement?
According to my view income tax is paid on net income which includes investing income as well as financing expense ,so it is gross expense which can neither be operating ,nor financing and nor investing. In cash flow statement any item which do not find any place in the above mentioned three activities than it will finally get its place in operating activity.............
Cash flow statement is something that depicts how cash flowed in that entity......So whenever the aspect of cash is reached in it......it mainly accrues through its operating activities.......i.e, the basic objective with which the entity is initiated......or the one with which it operates.........
Financing and investing activities are though substantial.....dont form part of the main activities or objectives of the entity......similarly tax paid ......mainly apportions to the operating activities which some substantial income to the entity....so it is disclosed seperately at the end of activities.........
hope ur clear.......
Income tax is on the profits or income earned by a business from its regular opeartions. Whereas Finance activity is conducted to budget & structure the capital of business. Investing activity is done to ensure proper mobilisation of funds & compliance of accounting standards(like retirement of assets). These are supporting activities to operational activity. Income tax is on the income from operational activity & hence an operating expense. Finance activity & Investing activities are not regular but extraordinary
phagun income tax is non operating expense ...............
Gupta Sachdeva & Co. Chartered Accountants
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