there are accrued expenses that will not become tax expenses until they are paid
there are accrued revenues that will not become tax revenues untill they are paid
What accounts do you use to record expenses that are not tax expenses in current period but will become tax expenses in next period when they are paid ?
What accounts do you use to record revenues that are not tax revenues in current period but will become tax revenues in next period when they are paid ?
I wonder how those problems are dealt with in UK ? Do you guys use any subsidiary accounts to record non tax expenses and revenues in a current period ?
-- Edited by rafapak on Monday 16th of December 2019 12:47:10 AM
I was thinking about Temporary Differences Between Taxable Income and Accounting Profits. When you have bad debt you have expense today (current period) but for tax purposes you have deduction in later period. Therefore you have to exclude your bad debt from tax calculation in current period. Do you have account where you record expenses that are excluded from tax calculation in current period ?
Without getting into any specifics, if your question is as to whether the books of account typically seek to reflect the detail of taxation adjustments, the answer is no. Taxation calculations are typically done off-books with only the final charge being reflected as an expense and a liability. In some circumstances, timing differences may result in deferred tax adjustments but, again, these are calculated off-books and recorded in a single aggregate double entry.
Good point Ian. I've just spotted the title of the question, whereas I was reading the body of the Q, although there seems to be some confusion as to what constitutes tax adjustments versus accounting adjustments.
Rafal, what AAt module are you on, can you post a copy of the question(s)?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Joanne, my question was not related to my aat studies. I asked this question out of curiosity. Where I live they use books to calculate taxes. It looks like they don't do the same in england.
