ACCT_461NotesCh5

ACCT_461NotesCh5 - -Life Insurance Premiums -Certain...

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Calculation of Net Income for Tax Purposes - All corporations have a financial statement prepared for accounting purposes using Generally Accepted Accounting Principles - This accounting statement must be adjusted to be in accordance with income tax rules. This is adjusted as follows: Net Income per Accounting Statement Add: Non-deductible expenses Add: Additional taxable income Deduct: Additional tax-deductible expenses Deduct: Accounting Income which is not taxable = Net Income for Tax Purposes
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General Limitation on Expenses - Expenditures are only allowed if incurred by taxpayer for the purpose of earning income from a business or property - This rule eliminates 1) personal expense paid through a business and 2) expenses that are not in the name of the company (business)
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Business Income – Differences from GAAP - CCA vs Amortization - Meals & Entertainment
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Unformatted text preview: -Life Insurance Premiums -Certain Warranty Reserves - not deductible unless based on actual costs -Interest & Property taxes on vacant land -Membership dues at social or recreational clubs -Different Capital Gain Rules Other Deductions Financing Expenses -deductible 1/5 per year for 5 years Lease Cancellation Costs -amortized over the term of the lease -Landscaping Costs are fully deductible -Interest Expense is deductible if loan is incurred to earn business income Convention Expense -only two allowed per year -must be in an area within territorial scope of the business Inventory Valuation -Inventory is allowed to be valued using FIFO, weighted average, or specific inventory price (not LIFO) Reserves (Provisions or Allowance) -Reserves for tax purposes are only allowed for Bad Debts, Undelivered Goods, Unpaid Amounts...
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ACCT_461NotesCh5 - -Life Insurance Premiums -Certain...

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