What are accrued taxes?

Accrued taxes refer to taxes that have been incurred but have not yet been paid. This concept is significant in accounting, particularly within the accrual basis of accounting, where expenses are recognized when they are incurred, regardless of when the actual payment is made.

When taxes are accrued, they accumulate over time, reflecting the obligation of the taxpayer to settle these taxes in the future. This can include income taxes that are owed based on earnings that have already been recognized in financial statements, but for which payment has not yet occurred. Accrued taxes are recorded as liabilities on the balance sheet, indicating that they are amounts the company must pay in the future.

In this context, the other options represent different aspects of taxation but do not correctly define what accrued taxes are. Understanding the definition and implications of accrued taxes is vital for accurate financial reporting and management.