new accounting period, subject to the provisions of Section 47. Accounting periods Fiscal Year An accounting period of 12 months ending on the day of any month other than December. Calendar Year An accounting period of 12 months which starts on the first day of January and ends on the last day of December. Calendar year should be allowed if: a. The taxpayer’s annual accounting period is other than a fiscal year. b. The taxpayer has no annual accounting period, or does not keep books. c. The taxpayer is an individual. a. While a choice of accounting period is a management discretion, change thereof must be approved by the Commissioner of Internal Revenue through the Revenue District Office of registration; b. The reason for change must be duly stated in the application; c. Submission of the final adjustment return; and, d. Duly approved amended By-laws for corporate taxpayers with the new accounting period. ITR, whether for an individual or for corporation, association or partnership, are required to be filed on Dec. 31st of every year FISCAL PERIOD - corporation, association, or partnership may with the approval of the Commissioner of IR, file their returns and compute their income on the basis of a fiscal year - An accounting period of 12 months ending on the last day of the month other than Dec. DOES NOT APPLY TO - individual taxpayer SHORT PERIOD an accounting period of a taxpayer for less than 12 months, as when the annual accounting period of a subsidiary is changed to conform with the annual accounting period adopted by its foreign parent company for easy consolidation of their audited worldwide financial statements. THIS IS AS AN EXE TO THE RULE - That the accounting period or taxable year consist of 12 months. 3.5 Apply the accounting methods METHOD OF ACCOUNTING CASH METHOD ACCRUAL METHOD All items of gross income received during the year shall be accounted for in such taxable year; and the only expense actually paid shall be claimed as deductions during the year A method of accounting for income in the period it is earned, regardless of whether it has been received or not. - same as for the expenses, it shall be accounted for in the period they were
(regardless of the taxable year when the services is performed or the expenses incurred). incurred, and not in the period they are paid admits both actual and constructive receipt of cash or its equivalent INSTALLMENT PAYMENT DEFERRED PAYMENT PERCENTAGE COMPLETEION Appropriate when: - collections of the proceeds of sale and income extends over relatively long periods of time and there is strong possibility that full collection will not be made this includes: 1.agreement of purchase and sale which contemplate that a conveyance is not to be made at the outset, but only after all or substantial portion of the selling price has been paid 2. sales in which there is a n Immediate transfer of title, the vendor being protected by mortgage or other liens as to deferred payments is applicable in case of: building, construction, installation contracts covering a period in excess of 1 year - whereby, gross income derived from such
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- Fall '16
- james reyes
- Taxation in the United States