The Importance of the Tax Accounting Systems
Accounting is not a phenomenon of the recent times. In fact ever since the human being started trading and doing business with each other, the accounting as a field has been used to keep a check on the finances of the organizations or the businesses that man established. It has always been seen that the people that had been involved in some kind of money making activities needed a system with the help of which they could keep a tack on the movement of their finances. Just as the businesses and traders had to keep an eye on the movement of their finances, in the similar way the governing powers needed a way out to make sure that the taxes that the citizens had to pay on their taxable incomes were being paid in the correct manner. Hence ever since the concept of businesses and the trading came into being, the tax accounting system also came into existence.
In the modern times the tax accounting system had to make adjustments to keep with the complexities as well as the intricacies involved in the business. It is important that the tax accounting system made sure that all the businesses were meeting the criteria that had been established in order to pay appropriate taxes. Thus it was important that the people who were behind the formulation of the tax policies as well as the people who were executing the policies understand the importance of keeping their tax accounting systems up to date as well as one-up on the tax paying population.
In general the tax accounting system has two methods that are followed in order to file the tax returns. These two methods are the cash basis method as well as the accrual based method. The cash base method calculates the income earned when the cash is received whereas the accrual base method considers the income earned when the event that would make sure that the cash would be received has occurred.