Outrageous Accounting Profit And Taxable Profit

Accounting profit is defined in IAS 12 paragraph 5 as net profit or loss for a period before deducting tax expense net profit or loss Being the excess or deficiency of revenues less expenses for that period. Accounting Profit is for a particular financial year while Taxable Profit is for the previous year assessed in the assessment year. The difference between Accounting Profit and Taxable Profit is that Accounting profit refers to the earnings calculated based on the accounting standards or GAAP Generally Accepted Accounting Principles Taxable profit adjusts the accounting profit for tax reporting that allows the organization to reduce their tax liability.

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The profitability of a company is important for both the company and the tax authority as both need to know the economic result of the company.

Accounting profit and taxable profit. Taxable Profit Taxable profit is the value used for tax declaration after adjusting accounting profit. Accounting profit also referred to as income before taxes is reported on a companys income statement following the prevailing accounting standards. Accounting profit is calculated using accounting principles and taxable profits are calculated using prescribed tax rules of the country.

What is the criteria to determine which trades are taxable. Accountants have a certain amount of legitimate leeway in measuring and reporting the revenue and expenses that drive the profit figure. Taxable income is the portion of a companys income that is subject to income taxes following the tax laws of the jurisdiction.

The composition of taxable profits varies by regional tax authorities. Profitablity is used to guide the company in deciding whether the business is viable whereas it is used by the tax authority to determine how much. Such revenues and expenses would be determined and.

For instance a government may declare that certain qualifying organizations have. Mostly accounting profits are greater than taxable profit. If a company does many trades a month the book keeping.

Accounting profit is used for the purpose of knowing companys profitability in the specified period while the Taxable profit is used for the purpose of identifying the tax payable by the company. However accounting income and taxable income are computed differently as they serve different purposes. The composition of taxable profit varies by taxation authority so it will vary depending upon the rules of the taxation authorities within which an entity is located or does business.

Economic profit is similar to accounting profit but it includes opportunity costs. Accounting profit and taxable profit differ in accounting for income taxes in the following ways. To calculate the value the company needs to alter accounting profits that are allowed under accounting standards and tax law.

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