Chapter 2 Flashcards
refers to the systematic and detailed recording of financial transactions of a business.
process of recording financial transactions pertaining to a business.
ACCOUNTING?
is a structure of accounting methods focused on taxes rather than the appearance of public financial statements.
is governed by the Internal Revenue Code, which dictates the specific rules that companies and individuals must follow when preparing their tax returns.
TAX ACCOUNTING
Tax accounting on the other hand deals with:
❑ Taxes
❑ Tax Preparation
❑ Tax Returns
❑ Tax Payments
Accounting Methods recognized by the
Tax Code
Cash Basis
Accrual Basis
Completion of Contract Basis
Percentage of Completion Basis
Installment Basis
Crop Year Basis
is a method of accounting whereby all items of gross income received during the year shall be accounted for such taxable year and that only expenses actually paid for shall be claimed as deductions during the year.
Cash basis
is a method of accounting for income in the period it is earned regardless of whether it has been received or not
Accrual Basis
is an accounting method applicable to
contractors in the construction of building, installation of equipment and
other fixed assets, or other construction work covering a period in excess of
one year.
Completion of Contract Basis
is a method applicable in the case of a building, installation or construction contract covering a period in excess of one year whereby gross income derived from such contract may be reported upon the basis of percentage of completion.
Percentage of Completion Basis
is a method considered appropriate when collections extend over relatively long periods of time and there is a strong possibility that full collection will not be made.
Installment Basis
is a method applicable only to farmers engaged in the production of crops which take more than a year from the time of planting to the process of gathering and disposal.
Crop Year Basis
