The accounting policy of the enterprise is the basis of the activities of the accounting service on business entities. Therefore, it is extremely important to make the right choice regarding one or another method of allocating income and expenses, so that subsequently there are no misunderstandings with the fiscal authorities. In the article below, we will talk about how it is possible to reflect the results of the operating activities of an enterprise in accounting.
The nature and classification of income in the enterprise
According to the current legislation, any profit that a business entity receives in the course of its activity, and which can be calculated in value terms by various methods (there is a cash basis or accrual method) is accepted as income.
At the same time, there is a category of income to the entrepreneur’s budget, which is excluded from income and is not taxable. These include additional taxes (they are also called indirect), which are the added value of the goods that the buyer covers upon purchase.
In general, the revenue part is determined by analyzing the primary and tax accounting documents, as well as others, confirming the fact of the transaction. In other words, income is classified into taxable and those that are not subject to fiscal tax calculation.
Profit as an object of taxation
It's no secret that net profit is formed from the total revenue minus a number of mandatory contributions, after which the total income is calculated in various ways (such as, for example, the accrual method and the cash method).
The amount received is taxable and meets the following conditions:
- financial flows should be the result of sales activities;
- revenue is deemed received even if it is presented not in cash but in kind.
However, there is also such income, which is considered to be non-operating and taken into account as a result of operating activities. It should include various types of shares, interest on deposits, exchange differences, fines, penalties and others received.
Such income in favor of a business entity as leased property, loans, as well as contributions to the authorized capital of an enterprise are not taxable.
The nature and classification of expenses
When it comes to expenses, many start-ups who do not have experience in entrepreneurial activity think that any operating costs reduce taxable profits. However, this is a fallacy. Yes, the expense is a certain amount, expressed in value form and calculated in any convenient way regulated by law (for example, one of these is the cash method), by which you can reduce income before tax. However, there are a number of operations that do not have the right to be accepted for accounting for gross results.
Therefore, each expense must have an adequate justification, confirm the fact of its accomplishment with documents, and also relate to the direct activities of the business entity.
Documentation of expenses
For each type of cost, the fiscal authorities request a certain list of documents, which may slightly differ from the following:
- if it is a business trip expense, an advance report is required with a supporting certificate, receipts for housing and transport;
- transport services - waybills, acts of acceptance of the rendered services;
- rental of property - settlement documents confirming payment, contracts, acts of transfer and acceptance;
- mobile communications - contracts, orders for use, detailing of accounts, list of authorized employees;
- operation of service vehicles - waybills;
- purchase of drinking water - a certificate from the relevant authorities about the unsuitability of local tap water for use, settlement documents.
Varieties of expenses
So, the expenses are already supported by documents, after they need to be calculated in any convenient way (for example, for this there is an accrual method and a cash method, which we will talk about a little later), but first, let's try to classify the available costs. It should be understood that such can be even if the company has no profit. Therefore, according to the decree of the Ministry of Finance of the Russian Federation, they should not be distributed relative to the revenue part (since they do not always fall on it), but in accordance with their own classification.
There are only two varieties, and they are easy to remember:
- Those costs that are subject to taxation (are non-operating and involved in the production process).
- Non-taxable costs, in other words, other.
Expense as an object of taxation
In order to determine the amount of revenue, you can use the cash method of determining income, but if the latter are not in the balance sheet as such, then all attention when summing up financial results must be paid to expenses. As mentioned above, they can both be taxed or not - all this is in accordance with current legislation.
The former include production and sales, material (or, as they are also called, raw), labor (wages of employees), depreciation and others.
Costs that are not taxable are also called standardized. Their list is regulated by Art. 270 of the Tax Code of the Russian Federation. Among them may be shortages, hospitality expenses, as well as compensation for personal expenses of employees that were carried out in the process of business trips.
Cash method: definition and features of use
Finally, we got to the methods of calculating income and expenses for the reporting period. First you need to understand that such a procedure covers only those operations that are legally subject to accounting. The cash method of recognition of income and expenses is based on the arithmetic average, which is calculated for the entire period in aggregate and takes the value of net profit for its constant . The latter, as stated in the explanations of the fiscal service, should be less than 1 million rubles per month.
And this means that half a year should have a maximum of income - 6 million rubles. How this amount will be distributed remains at the discretion of the business entity. Therefore, it will be completely legal if the entrepreneur in the first three months does not receive any profit, and in the subsequent months it will amount to 2 million for each reporting period.
Cash Exceptions
The cash method has a lot of disadvantages. For starters, as you have already noticed, it has limitations on the amount, which means that large business entities with an average revenue of more than 1 million rubles simply cannot apply it legally. There is a list of institutions that are deprived of this method of recording the results of operations.
So, according to the Tax Code, the cash method of recognition of income and expenses is excluded in its use for the following business representatives:
- financial institutions engaged in banking;
- those business entities that take part in the aggregate management of the farm in accordance with an agreement on trust management of assets or on a simple partnership.
Cash accounting
If the business entity has chosen this method of reflection in the financial results of its own revenue, then it is obliged to reflect this in the current accounting policy of the enterprise and in the future follow it. The cash method of recognition of income and expenses in the income part has a number of features fixed by the current legislation, therefore, their observance is mandatory for any forms of business that are allowed to use this accounting option according to the Tax Code of the Russian Federation:
- the recognition date of receipt is considered the day on which the funds were credited to the account of the business entity in a bank;
- the condition above also applies to any work and services for the benefit of business that are considered non-property;
- if the company provided loans to someone, then on the day of their repayment, income is also fully reflected.
In other words, the cash basis method can be based on actual operations. Otherwise, proceeds in favor of a business entity are not recognized.
Cash costs
As you already understood, with such an accounting policy, expenses will be taken into account only if there was a documented fact of their implementation. In the case of the costly part of the balance sheet, the cash method of recognition of income and expenses accepts the fact of direct payment and nothing more as confirmation. The latter also speaks of the termination of mutual obligations between counterparties in accordance with the standards specified in the Tax Code of the Russian Federation.
And this means that the cash method of cost accounting excludes the inclusion in the cost part of those payments that are considered advance payments for services and goods, but have not yet been made. In this case, the transaction flows will be included in the financial result on the day the goods are shipped or services are provided under the contract.
Accrual Income
If the cash method of income and expenses recognizes transactions only when they have actually been completed, then the accrual method, on the contrary, is required to reflect obligations in the financial results on the day they arise, regardless of the actual implementation of the terms of the transaction.
According to the general rule for recording revenue from sales, the transaction will be shown as an operating result on the day of signing the act on the provision of work and the provision of goods.
However, there is also a special rule regarding those complex arrangements, the result of which cannot be reflected in one reporting period. In this case, income is reflected evenly with respect to each fixed period of time, and this is regulated by the accounting policy of the enterprise.
Accrual expense
If the cash method of accounting requires actual confirmation of the costs incurred, then with the accrual methodology regarding costs, things are somewhat different. The principles of the latter include the following:
- costs are recorded in the period to which they relate documented, regardless of the date of the actual transaction;
- if the terms of the contract indicate the timing of the fulfillment of obligations, they fall into the financial result, otherwise the taxpayer can determine them at his discretion;
- the principles referred to in the paragraph above also apply to those forms of contracts that specify only the payment framework, but do not say anything about the shipment of goods and the provision of services;
- if expenses cannot be classified and attributed to any cost center, then their total amount is distributed evenly with respect to the entire revenue side.