2013년 11월 29일 금요일

About 'accrual accounting system'|ACCOUNTING SYSTEM IN HINDU ARTHA SASTRA







About 'accrual accounting system'|ACCOUNTING SYSTEM IN HINDU ARTHA SASTRA








               According               to               the               IRS,               most               individuals               and               many               small               businesses               use               the               cash               method               for               tax               purposes.

According               to               this               method,               income               is               reported               in               the               tax               year               it               is               received               and               expenses               are               reported               in               the               tax               year               they               are               paid.

The               other               method               is               the               accrual               method,               in               which               income               is               reported               in               the               year               it               is               earned,               regardless               of               when               it               is               received,               and               expenses               are               reported               in               the               year               incurred,               regardless               of               when               they               are               paid.
               The               method               of               payment               sometimes               leads               to               confusion               when               using               the               cash               method.

For               example,               if               you               pay               for               a               tax-deductible               expense               with               a               credit               card               in               December,               and               you               pay               the               credit               card               bill               in               January,               in               which               year               do               you               claim               the               deduction?
               If               you               claim               an               itemized               deduction               for               medical               expenses               or               charitable               contributions,               for               example,               the               IRS               points               out               that               if               you               pay               the               expense               by               check,               the               day               you               mail               or               deliver               the               check               is               generally               the               date               of               payment.

This               may               affect               payments               you               make               by               check               at               the               end               of               the               year.

For               example               if               you               date               a               check               the               30th               of               December               but               do               not               mail               it               until               January               2nd,               the               date               of               payment               for               tax               purposes               would               be               in               January.
               If               you               use               a               pay               by               phone               system               or               pay               an               expense               online,               the               payment               date               would               be               the               date               reported               on               the               statement               from               your               bank               or               financial               institution.

So               the               date               you               schedule               the               payment               could               determine               the               tax               year               in               which               you               can               deduct               the               expense.
               If               you               pay               by               credit               card               the               payment               date               for               tax               purposes               is               the               date               the               charge               is               made,               and               not               the               date               on               which               you               pay               the               credit               card               bill.

So               deductible               expenses               you               charge               to               your               credit               card               in               December               are               deductible               that               year,               even               though               you               pay               the               credit               card               bill               in               January.
               If               you               qualify               for               one               of               the               tax               benefits               for               education,               which               include               the               American               opportunity               credit,               the               lifetime               learning               credit,               or               the               tuition               and               fees               deduction,               you               can               claim               qualified               education               expenses               you               paid               with               the               proceeds               of               a               loan.

According               to               the               IRS,               you               can               claim               the               expenses               in               the               year               they               are               paid,               not               the               year               the               loan               is               paid.

Loan               payments               that               are               sent               directly               to               the               education               institution               are               treated               as               paid               on               the               date               the               institution               credits               the               student's               account.
               You               should               keep               in               mind               that               you               may               also               qualify               for               the               student               loan               interest               deduction               when               you               start               paying               the               loan.
               Sources:
               Publication               502,               Medical               and               Dental               Expenses,               IRS
               Publication               526,               Charitable               Contributions,               IRS
               Publication               538,               Accounting               Periods               and               Methods,               IRS
Publication               970,               Tax               Benefits               for               Education,               IRS






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