Proper recording of pre-paid taxes taken out of reserve for taxes

KJIsaacson

I have a Reserve for Taxes set up. I understand that's a liability I also need to set up a Pre-Paid Taxes account, which I understand would be an asset.

Logically, it seems to me I need to move some money from the Reserve for Taxes over to the Pre-Paid Taxes. But unless I'm misunderstanding something, I'd need to debit the Reserve (thus reducing it). But if I credit the Pre-Paid taxes, that would reduce that asset account? How do I get a debit entry in the Pre-Paid asset account?

Thanks!

Barsin

Hey there @KJIsaacson

I've moved your question to the accounting support thread to get more CPA's eyes on this.

Would you mind providing a bit more of a use-case scenario of exactly what these transactions may look like in the real world? This will give us more context when trying to answer your question. Thanks so much.