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>whether the transaction has tax relevance, It is almost always a matter of the account having tax relevance, not each individual transaction that involves tha

>whether the transaction has tax relevance, It is almost always a matter of the account having tax relevance, not each individual transaction that involves that account. > the only way to represent that expense in strict double book is to have 2 accounts for (Repairs_Tax, Repairs_Notax) There are very few accounts that need to be split like that for tax purposes. Meals & entertainment are one such (although the tax laws about that change from year to year sometimes), and maybe the part of dues to a professional organization that are for political lobbying purposes. It's really not a problem at least in the U.S. tax code. And note, as I previously commented, it is quite common for a business to have at minimum two sets of books, one for tax and one for book (the company's own internal representation of its financial position). >[T-accounts] just seem to be a visual method to represent negative numbers T-accounts are an instructional tool, they are not used for actual production accounting purposes. And they don't represent negative numbers, they illustrate a journal entry's effect on the general ledger accounts. Therefore, there is no need to include a date attribute. Rest assured, in a real double-entry system, every single debit and credit is date-stamped.

mindslight 5y ago
> There are very few accounts that need to be split like that for tax purposes I disagree. Take repairs - according to tax law, some can be deducted and some need to be capitalized. What I would expect from "accounting" software is to ask you questions about the type of expense, and decide what category (account) it needed to be placed in. And then for depreciated expenses, let you pick a depreciation method and track that year to year. > it is quite common for a business to have at minimum two sets of books, one for tax and one for book That contradicts your claim that it's not necessary to split most accounts, since at least all accounts are being doubled! From a programming perspective, why would you want to copy the entire data model and then make some modifications to one copy, rather than having a single data model that models everything? > (the company's own internal representation of its financial position). I'll admit that for my own purposes I'm discounting this, as it seems less applicable to small businesses. The real reason I need to track "depreciation" is because tax law makes me do so. From my perspective, a large expense is still money out the door on day 1. Sure I've done basic profitability projections using capital costs amortized over a number of years, but I don't see how I'll gain by committing to those and then later having to further model deviations from the expectation. > T-accounts are an instructional tool, they are not used for actual production accounting purposes I don't understand why teaching accounting seems to revolve around teaching its basic operations of adding and subtracting, which should have been covered in grade school. There's obviously some common data models that professional accountants use, but it seems like they're implicit knowledge rather than ever being directly described.
- PopAlongKid 5y ago
  >Take repairs - according to tax law, some can be deducted and some need to be capitalized. The ones that need to be capitalized are not repairs (they are betterments, adaptations, or restorations, per IRS regulations), so they wouldn't go against the repair expense account. Instead, they would go into an asset account. >That contradicts your claim that it's not necessary to split most accounts, since at least all accounts are being doubled! In practice, no one actually keeps two complete sets of books. Instead, the tax return starts with the company balance sheet and income statement per books, and then makes book-to-tax adjustments only for those categories that require it, like meals and entertainment. The tax return in this sense serves as a specialized accounting system. >why would you want to copy the entire data model and then make some modifications to one copy, rather than having a single data model that models everything? The tax version of the company accounts is typically only updated once per year, and usually requires specialized knowledge of the tax laws, which change year to year. It isn't really designed for day to day management like the regular company books are, and as I have observed with the tax returns I prepare for small business, most owners don't really spend any time looking at the tax return. >From my perspective, a large expense is still money out the door on day 1. But lenders and the IRS don't see it that way. Maybe what you need is the third basic type of accounting report, the cash flow statement. Many if not most companies that go bankrupt have net positive equity, but negative cash flow. The cash flow statement, like the tax return, is also created on an "adjustment" basis, starting with net profit and then backing out the income and expense items that are not current inflows or outflows of cash, such as depreciation.

mindslight 5y ago

> There are very few accounts that need to be split like that for tax purposes I disagree. Take repairs - according to tax law, some can be deducted and some need to be capitalized. What I would expect from "accounting" software is to ask you questions about the type of expense, and decide what category (account) it needed to be placed in. And then for depreciated expenses, let you pick a depreciation method and track that year to year. > it is quite common for a business to have at minimum two sets of books, one for tax and one for book That contradicts your claim that it's not necessary to split most accounts, since at least all accounts are being doubled! From a programming perspective, why would you want to copy the entire data model and then make some modifications to one copy, rather than having a single data model that models everything? > (the company's own internal representation of its financial position). I'll admit that for my own purposes I'm discounting this, as it seems less applicable to small businesses. The real reason I need to track "depreciation" is because tax law makes me do so. From my perspective, a large expense is still money out the door on day 1. Sure I've done basic profitability projections using capital costs amortized over a number of years, but I don't see how I'll gain by committing to those and then later having to further model deviations from the expectation. > T-accounts are an instructional tool, they are not used for actual production accounting purposes I don't understand why teaching accounting seems to revolve around teaching its basic operations of adding and subtracting, which should have been covered in grade school. There's obviously some common data models that professional accountants use, but it seems like they're implicit knowledge rather than ever being directly described.

PopAlongKid 5y ago
>Take repairs - according to tax law, some can be deducted and some need to be capitalized. The ones that need to be capitalized are not repairs (they are betterments, adaptations, or restorations, per IRS regulations), so they wouldn't go against the repair expense account. Instead, they would go into an asset account. >That contradicts your claim that it's not necessary to split most accounts, since at least all accounts are being doubled! In practice, no one actually keeps two complete sets of books. Instead, the tax return starts with the company balance sheet and income statement per books, and then makes book-to-tax adjustments only for those categories that require it, like meals and entertainment. The tax return in this sense serves as a specialized accounting system. >why would you want to copy the entire data model and then make some modifications to one copy, rather than having a single data model that models everything? The tax version of the company accounts is typically only updated once per year, and usually requires specialized knowledge of the tax laws, which change year to year. It isn't really designed for day to day management like the regular company books are, and as I have observed with the tax returns I prepare for small business, most owners don't really spend any time looking at the tax return. >From my perspective, a large expense is still money out the door on day 1. But lenders and the IRS don't see it that way. Maybe what you need is the third basic type of accounting report, the cash flow statement. Many if not most companies that go bankrupt have net positive equity, but negative cash flow. The cash flow statement, like the tax return, is also created on an "adjustment" basis, starting with net profit and then backing out the income and expense items that are not current inflows or outflows of cash, such as depreciation.