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On the contrary, most places enforce this kind of 'deferral' (the accruals concept) to stop cheating. Imagine i took all of the cost first and the revenue lat
by jimnotgym 3y ago
On the contrary, most places enforce this kind of 'deferral' (the accruals concept) to stop cheating. Imagine i took all of the cost first and the revenue later. I could offset the loss from this against my other income (which is taxed at source) and get a refund out of the tax authorities! It would be like an interest free loan!
- bruce511 3y agoIt's also enforced here to keep reports of profits sane. If I report revenue as profit (without adjusting for future expense) then I'm artificially reporting "higher profit than what actually happened." This artificially boosts share prices, and other things, which can have unfortunate effects downstream. Take Worldcom. They defered expenses (by capitalising the phone bill to be depreciated in future years) thus boosting reported profits. With, um, unfortunate results. So yeah, in my jurisdiction its enforced. But I can imagine that in other places its not, or revenue is taxed, or whatever.
- jimnotgym 3y agoTaxing revenue is very useful with multinationals who use cunning tricks to move profits back to their home countries. So yes it remains a valid tax
- rvba 3y agoTax result <> bookkeeping result <> cash flow In many countries tax office does not care about your bookkeeping result. Tax is calculated using separate rules (and then becomes part of bookkeeping result). Also if we go to philosophical discussions: you can have great bookkeeping result yet no money, or lots of money now, but unprofitable projects (e.g. construction companies).