自制note chapter 6.docx

自制note chapter 6.docx - Part Three The Measurement of...

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Part Three: The Measurement of Taxable Income Chapter Three: Taxable Income from Business Operations Learning objectives LO 6-1. Define gross income and taxable income. LO 6-2. Describe the relationship between business operating cycle and taxable year. LO 6-3. Identify the permissible methods of accounting for tax purposes. LO 6-4. Explain why tax policy objectives affect the taxable income computation. LO 6-5. Apply the cash method of accounting to compute taxable income. LO 6-6. Apply the accrual method of accounting to compute taxable income. LO 6-7. Differentiate between a permanent and a temporary book/tax difference. LO 6-8. Explain the difference between tax expense per books and tax payable. LO 6-9. Apply the tax accounting rules for prepaid income and accrued expenses. LO 6-10. Explain how the NOL deduction smooths taxable income over time. 一、 BUSINESS PROFIT AS TAXABLE INCOME taxable income : gross income minus allowable deductions. gross income : all income from whatever source derived. Deductions are allowed by legislative grace and include “all ordinary and necessary expense … in carrying on any trade or business” 二、 THE TAXABLE YEAR A firm’s taxable year generally corresponds to its annual accounting period for financial statement purposes. If a firm keeps its financial books and records on a calendar year , it measures taxable income over the same January through December period. If a firm keeps its financial records on a fiscal year (any 12-month period ending on the last day of any month except December), it uses this fiscal year as its taxable year. It’s decided by the firm’s operating cycle (一) Changing a Taxable Year A firm can’t change its year unless it formally requests and receives permission to do so from the IRS. If IRS grants permission, the firm files a short-period return to accomplish the change (二) Annualizing Income on a Short-Period Return A The taxable income reported on the return must be annualized —mathematically inflated to reflect 12 months of operations. Annualized 的 计算!) The short-period income reported on the first return filed by a new business entity or the last return filed by an entity going out of business may be taxed at a bargain rate. (新公司第一次和倒闭公司最后一次交税可以不用 annualized 三、 MATHODS OF ACCOUNTING A method of accounting : a consistent system for determining the point in time at which items of income and deduction are recognized (taken into account) for tax purposes. The Internal Revenue Code permits firms to use the cash receipts and disbursements (cash) method, the accrual method, or a combined (hybrid) method as their overall method of computing taxable income.
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  • Fall '16
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