Do you pay property taxes on buildings or land? Your tax payment may not be due for several months, but in reality you incur one-twelfth of your annual property tax bill every month. At the end of the accounting period, you should make an adjusting entry in your general journal to set up property taxes payable for the amount of taxes incurred but not yet paid.

 

Estimated property taxes of $5,200 were assessed on July 1, 2001, for the 12-month period ending on June 30, 2002. The first payment is due on March 1, 2003. As of December 31, 2001, no payments have been made on this assessment. You need to accrue six months of property taxes ($2,600) on December 31. Make the following general journal entry: