Income Tax Refund Journal Entry:

When a business or individual receives an income tax refund, it signifies that they have overpaid their income taxes to the government. This refund amount is typically deposited directly into the bank account of the taxpayer. To record this transaction in the accounting books, a journal entry is made to reflect the deposit of the income tax refund.

Here is the journal entry to record the income tax refund deposit:

1. Debit Bank Account:
The bank account is debited to reflect the increase in the cash balance due to the deposit of the income tax refund. This entry is made on the debit side of the journal.

2. Credit Income Tax Refund:
The income tax refund account, which is a liability account, is credited to reduce the liability and reflect the decrease in the amount owed to the taxpayer. This entry is made on the credit side of the journal.

Journal Entry Example:

Assuming a business receives an income tax refund of $500, the journal entry to record this transaction would be as follows:

Date: [Date of deposit]
Account: Bank Account
Debit: $500
Account: Income Tax Refund
Credit: $500

This journal entry reflects the increase in the bank account by debiting it with $500 and decreases the income tax refund liability by crediting it with $500.

Summary:

When an income tax refund of $500 is deposited into the bank account, the journal entry would be:

Debit: Bank Account ($500)
Credit: Income Tax Refund ($500)

This entry accurately records the increase in cash balance and the reduction in the income tax refund liability.