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Posted by nearly_blind on June 10, 2008, 1:54 pm
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I'm a officer/founder of a small C corp. Another person is responsible
for the bookkeeping (who is not an accountant, but an engineer) with
the help of a CPA.
Every quarter the "bookkeeper" generates a YTD P&L statement
from QuickBooks (I guess it can do this automatically). This is
probably not relevent,
but he generates CASH and ACCURAL version for us for reference,
although we file our
taxes using CASH.
My specific question is should taxes (e.g. federal) paid (and TAXES
due for the accrual case) be
included as a Expense on the P&L? He says yes, but I think they
should not be.
In our case tax management is one our primary concerns (distributing
salary/commision payments
over the year to minimize profits, corporate taxes, and late estimated
tax penalties).
When taxes are included in the P&L you have to remember to add these
back
into the net income to to estimate the taxable profits.
Does the standard definition of a P&L include taxes or not? - Thanks
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Posted by QBConsultant on June 10, 2008, 3:48 pm
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Since you're a C corp, the corporate income taxes are an expense. You
can list them as other expenses so they show up at the very bottom of
the P&L. But, I'm not a tax expert.
Michelle L. Long, CPA, MBA
Author of: Successful QuickBooks Consulting: The Complete Guide to
Starting and Growing a QuickBooks Consulting Business
http://www.SuccessfulQuickBooksConsulting.com
http://www.amazon.com/Successful-QuickBooks-Consulting-Comprehensive-Startin=
g/dp/1434810690
On Jun 10, 12:54=A0pm, nearly_bl...@yahoo.com wrote:
> I'm a officer/founder of a small C corp. Another person is responsible
> for the bookkeeping (who is not an accountant, but an engineer) with
> the help of a CPA.
> Every quarter =A0the "bookkeeper" generates a =A0YTD =A0P&L statement
> from QuickBooks (I guess it can do this automatically). This is
> probably not relevent,
> but he generates CASH and ACCURAL version for us for reference,
> although we file our
> taxes using CASH.
>
> My specific question is should taxes (e.g. federal) paid (and TAXES
> due for the accrual case) be
> included as a Expense on the P&L? =A0He says yes, but I think they
> should not be.
>
> In our case tax management is one our primary concerns (distributing
> salary/commision payments
> over the year to minimize profits, corporate taxes, and late estimated
> tax penalties).
> When taxes are included in the P&L you have to remember to add these
> back
> into the net income to to estimate the taxable profits.
>
> Does the standard definition of a P&L include taxes or not? - Thanks
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Posted by John on June 11, 2008, 6:54 am
Please log in for more thread options On Jun 10, 12:54 pm, nearly_bl...@yahoo.com wrote:
> I'm a officer/founder of a small C corp. Another person is responsible
> for the bookkeeping (who is not an accountant, but an engineer) with
> the help of a CPA.
> Every quarter the "bookkeeper" generates a YTD P&L statement
> from QuickBooks (I guess it can do this automatically). This is
> probably not relevent,
> but he generates CASH and ACCURAL version for us for reference,
> although we file our
> taxes using CASH.
>
> My specific question is should taxes (e.g. federal) paid (and TAXES
> due for the accrual case) be
> included as a Expense on the P&L? He says yes, but I think they
> should not be.
>
> In our case tax management is one our primary concerns (distributing
> salary/commision payments
> over the year to minimize profits, corporate taxes, and late estimated
> tax penalties).
> When taxes are included in the P&L you have to remember to add these
> back
> into the net income to to estimate the taxable profits.
>
> Does the standard definition of a P&L include taxes or not? - Thanks
the accrual method of accounting should include taxes relating to that
period of income (not what is paid out of the cash account) it's
calculated as a percentage and adjusted later. The accrual P&L from
the quickbooks reports should not include taxes "paid" but just the
taxes for that quarterly period. there is no double counting if that
is what you are asking
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Posted by Paul Thomas, CPA on June 11, 2008, 8:27 am
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> Does the standard definition of a P&L include taxes or not?
Yes. Taxes are an expense of the business, even though federal income taxes
are not an expense of the business (same for individuals if you recall).
If your business is small, you may want to consider keeping your books on an
income tax basis, which may give you a better picture of your taxable
profit. Besides federal taxes, penalties and other items are not be
deductible by the company on it's return. These type of financial
statements are most useful for the owners and others who are deeply tuned
into the daily operations of the business, and may not be suitable for those
outside of the business who may not have a full understanding of your
accounting practices.
While federal income taxes are not deductible by the company on it's tax
return, they still are items that appear in a financial statement, even one
kept on the income tax basis.
As suggested, maybe consider placing corporate federal income taxes in an
"Other Income/Deductions" category below a "Net Profit/Loss From Operations"
subtotal.
--
Paul A. Thomas, CPA
Athens, Georgia
770-725-1433 Office
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Posted by Rocinante on June 11, 2008, 12:05 pm
Please log in for more thread options On Jun 10, 1:54=A0pm, nearly_bl...@yahoo.com wrote:
> I'm a officer/founder of a small C corp. Another person is responsible
> for the bookkeeping (who is not an accountant, but an engineer) with
> the help of a CPA.
> Every quarter =A0the "bookkeeper" generates a =A0YTD =A0P&L statement
> from QuickBooks (I guess it can do this automatically). This is
> probably not relevent,
> but he generates CASH and ACCURAL version for us for reference,
> although we file our
> taxes using CASH.
>
> My specific question is should taxes (e.g. federal) paid (and TAXES
> due for the accrual case) be
> included as a Expense on the P&L? =A0He says yes, but I think they
> should not be.
>
> In our case tax management is one our primary concerns (distributing
> salary/commision payments
> over the year to minimize profits, corporate taxes, and late estimated
> tax penalties).
> When taxes are included in the P&L you have to remember to add these
> back
> into the net income to to estimate the taxable profits.
>
> Does the standard definition of a P&L include taxes or not? - Thanks
Yes, you should include them on the income statement.
They should be recorded according to GAAP:
On an accrual basis, deferred tax assets and liabilities are
recognized when there is a temporary difference between the stated
value of an asset or liability for tax purposes and the value for
financial reporting purposes. The deferred tax is also contingent upon
the expectation that future revenue and income will be sufficient to
offset the deferred tax.
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