The Need and the Principals of the Tax Basis Accounting
Accounting as a subject is gaining a lot of importance in the present times than it did in the previous times. Every passing day is introducing us to newer developments in the field of management, technology as well as sciences. Newer and better options are now available to the accounting people to make their jobs a lot better and comfortable. Just like other fields the businesses too are witnessing an avalanche of changes sweeping the world of business. As a result accounting, that primarily deals with the management of the finances of an organization, also has to change in order to adapt. Accounting thus, in order to adapt has been divided into several fields out of which the tax basis accounting is one of the most important.
The tax basis accounting in the stricter sense of the term means preparing to file tax returns as well as planning for the future tax obligations. The tax basis accounting of a company is based on the applied financial accounting. Thus in order to choose a system for the tax basis accounting the organization has to keep the applied financial system as the reference point.
The various tax basis accounting methods are:
It is important that the tax payer must apply the same accounting method for the taxation purposes that he applies for the preparation of his reports. Another mandatory fact is that the accounting system for every year must remain the same. Any change that is sought by the companies or individuals to change their tax basis accounting method can be done only with the consent of the secretary of the treasury. Even if the secretary allows the change still then it would take time for the change to become effective.