According to an article published on TheNation Newspaper online, ‘Withholding Tax (WHT) is an advance payment of income tax. In principle, it is a payment for the ultimate income tax liability of the taxpayer or company. It is not a separate tax and does not confer an exemption from the filing of yearly tax returns by the company which suffered WHT. The tax is deducted at source when a payment is to be made to the beneficiary‘.
It is a tax deducted at source for service rendered or sales.
This article illustrates how you should treat Withholding Tax in an accounting software (QuickBooks)
Request For Our Accounting Software ServiceFor over 5 years, we have implemented QuickBooks for several companies under Retail, Manufacturing, Oil & Gas, Real Estate & Construction, Travels, Hospitality,Legal, Co-operatives, NGOs, Financial & Service Sectors.
- Mbaire Services Nigeria Ltd(Construction)
- Aristokrat 360 Limited(Creative & Media Agency)
- Hawkes Legal(Legal)
- Lilygate Hotel(Hospitality)
- Josien Holdings Limited(Distribution)
- Aisha Buhari Foundation (Futured Assured)(NGO)
- Doheney HR Services(HR)
- Biddel Oil & Gas Limited (Oil & Gas)
- System Intelligenz Limited(Contractor)
- MagTech Information Security (IT)
- Infusion Cakes Nigeria (Bakery)
- Landmark Centre (Event Centre)
- Mountain Ice Travel & Tour (Travels)
- BTS System (Service)
- Logos Travel Support & Solutions Ltd (Travels)
- Germaine Auto Centre (Autos)
- BD Consult (PR)
- Starlight Nigeria (Retail)
- Temple Private School (Education)
- C. Charles Resources Limited (IT consulting)
- Adeniyi Coker Consultants Limited (Real estate and construction)
- The Nigerian Economic Summit Group (NGO)
- Value Mart Supermarket (Retail)
- Transweb Bureau De Change (Financial Service)
- Wakanow Travels (Travels)
- Vektro Food Limited (Manufacturing & Retails)
- Orient Petroleum PLC (Oil & Gas)
- Plus More
When you render a service or make a sale to your customers, by law they are expected to withhold a certain percentage of the transaction value as a tax which is remitted to tax agency and at the end pay the remaining balance as settlement. In such scenario, you are expected to treat the balance as WHT or else the system will hold it an account receivable balance.
Here are the steps to follow:
Note: I assume you have entered an invoice and received payment on your accounting software.
- Open the General Journal window of your accounting software.
- Under the ‘Account’ column, select ‘Accounting Receivable’ and ‘WHT Receivable’
- Credit the Former and Debit the Latter with amount withheld by the customer
- Select the customer’s name and fill other fields – Date, General Journal No and Memo.
The second stage is treatment of Withholding Tax when it’s finally remitted to tax authority
- Open the ‘General Journal window of your accounting software.
- Under the ‘Account’ column, select ‘Withholding Tax Receivable’ and Withholding Tax Expenses.
- Credit the Former and Debit the Latter.
It is also assumed that you’ve entered a ‘Bill’ in your accounting software to track account payable.
- Open the General Journal window on your software and select ‘WHT Payable’ and ‘Account Payable’
- Credit the former and Debit the latter.
When your remit all deductions to tax authorities, here are steps to follow:
- Debit WHT Payable account
- Credit the bank account payment was made from.
See Here – Accounting For Structured Settlement Annuity
For more inquiries on how we can setup an accounting system for your business, send a request to firstname.lastname@example.org
Hope you find this accounting treatment for withholding tax useful? Read more tips on accounting treatment for business transactions here
Recommended QuickBooks Software With Genuine License Details:
Order Now, Call 08105090001, 08084219399
QuickBooks Premier – 1 User₦90,000.00 Add to cart
QuickBooks Premier – 3 Users₦265,000.00 Add to cart
QuickBooks Premier – 4 Users₦448,000.00 Add to cart
QuickBooks Premier – 5 Users₦339,100.00 Add to cart
QuickBooks Premier – 2 User₦177,000.00 Add to cart
QuickBooks Pro – 1 User₦73,000.00 Add to cart
QuickBooks Pro – 2 Users₦135,000.00 Add to cart
QuickBooks Pro – 3 Users₦195,000.00 Add to cart
Recent search terms:
- withholding tax accounting treatment (10)
- accounting treatment of withholding tax (6)
- treatment of withholding tax (6)
- withholding tax accounting entries (3)
- accounting for withholding tax entries (1)
- withholding tax entries (1)
- what is the account treatment for withoulding tax (1)
- treatment of witholding tax in accounts (1)
- treatment of withholding tax credit note (1)
- treatment of with (1)
- how to treat tax liability in public sector accounting (1)
- How to record witholding tax in accounts (1)
- How is withholding tax receivable treated in the balance sheet (1)
- double entry for witholding tax (1)
- accoutning for witholding taxes (1)
- accountingtreatmentofwithholdingtaxandcorporateincometax (1)
- withholding tax singapore double entry accounting (1)