Question

During the semester we learned the importance of reconciling from book income to taxable income, and the important of understanding the debits and credits, especially as we are accountants!

I would like you to show how you understand to do the calculations by explaining to me the following:

1. Please identify whether the item is a debit or credit for financial statement purposes (debit or credit)=

2. Whether the tax treatment is the same as for book purposes- yes or no

3. confirm the appropriate tax treatment for the item (1 points) and why. Is the item taxable, exempt, fully deductible, partially deductible, non -deductible?

4. The amount for taxable income purposes. For example, if it is non-refundable then the amount would be $0 of expense.

Answer 1

Treatment	Explanations for Reconciliation
1. Please identify whether the item is a debit or credit for financial statement purposes (debit or credit)=	Yes, Certain income may not be taxable i.e Capital receipts. Treatment for the same is required while making reconciliation of Taxable incoem from Book income.
2. Whether the tax treatment is the same as for book purposes- yes or no	Yes, It is important because treatment in Tax is different from Account will bring the difference of Incoem as per books and as per Tax.
3. confirm the appropriate tax treatment for the item (1 points) and why. Is the item taxable, exempt, fully deductible, partially deductible, non -deductible?	Yes, it is required to confirm, because exempt will not be taxable as per Incoem tax.
4. The amount for taxable income purposes. For example, if it is non-refundable then the amount would be $0 of expense.	The treatment for the same need to be check, Then sam eshall be regarded as income in Books and treatment in tax shall be evaluated.