Discussion:Year end invoices
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| Revision as of 15:52, 9 October 2006 Mauro (Talk | contribs) (Also, it all dep) ← Previous diff |
Revision as of 16:35, 9 October 2006 Jc (Talk | contribs) (Well, I haven't) Next diff → |
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Revision as of 16:35, 9 October 2006
Discussion Forum Index --> Tax Questions --> Year end invoices
| 9 October 2006 | |
| If a corporation issues an invoice on December 26th and it's paid in February of the next year, to which tax year is the income applied? | |
Action Jackson (talk|edits) said: | 9 October 2006 |
| Jc
It depends whether the corporation is on a tax basis or accrual basis. If the corporation is on the accrual basis, sales should be booked for the period in which they are mailed. If the corporation is on the cash basis, sales should booked in the period in which the cash is received. | |
| 9 October 2006 | |
| Also, it all depends on the accounting method that the corporation adopted. As "Action Jackson" stated above, they are two accounting methods
-Cash Method - The corporation reports income in the tax year received. Usually deducting or capitalizing expenses in the tax year paid. OR - Accrual Method - The corporation reports income in the year earned, even thought you may receive payment in a later year. Here you deduct or capitalize expenses in the tax year that are incurred, whether or not you may pay them that year. If the corporation need inventories you must generally use an accrual method of accounting for purchases and sales. See publication 538 for inventories. I hope it helps. | |
| 9 October 2006 | |
| Well, I haven't made a conscious decision to do one or the other -- my business has zero inventory, and is completely services based. I'll assume for now that it's a cash basis corp and that I'll only be reporting income received this year. Thanks for your help. | |
