Cash method It is one of the 2 main methods for recording income and expenses. In this article, you can get information about the basic principles of accounting with the cash method, the timing of income and expenses.
The rule of accounting of income and expenses
Article 130.1 of the Tax Code Basically, the taxpayer must keep accurate and timely accounting of his income and expenses for the purpose of accurate reflection of taxable income (profit) based on documented information, and also, depending on the applied accounting method, he must attribute his income or expenses to the relevant reporting periods. In the used accounting method, the taxpayer must comply with all the requirements set by the terms and accounting rules of receipts and expenses.
According to the law:
- micro-entrepreneurs, depending on their choice, use one of two methods of accounting of expenses and income - calculation or cash method;
- and small, medium and large business entities keep records of income and expenses using the calculation method.
The taxpayer must apply the same method he chose during the tax year.
Pay using the checkout method and revenue accounting principles
When a taxpayer accounting by the cash method receives income or when the income is placed at his disposal, he must take this income into account and deduct his expenses from the income only when he incurs these expenses.
On a cash basis, revenue and transactions are recognized when received from customers. Expenses are shown when cash is paid to suppliers and employees and suppliers.
Using the checkout method time of income generation
Where the taxpayer receives cash, and in the case of non-cash payments, the cash is in the bank, electronic money or in another credit institution The time when the income is received in his account, in the account that has the right to receive said funds, or in another account that he may be the administrator of.
In the event that the taxpayer's financial liability is paid and canceled, the time when the liability is paid and canceled is considered the time when the income is received. (when mutual settlements are made and in other similar cases)
Time of incurring the cost when the cash method is used
When a taxpayer uses the cash method for tax accounting purposes, the time the expense is incurred is the time the expense is actually incurred. (unless other cases are provided for by law)
In the case of the payment of cash by the taxpayer, the bank where the cash is paid, and in the case of non-cash payments, the instruction of the taxpayer to transfer the funds, electronic money or other credit institution the time when it is received by is considered the time when the cost is incurred.
In the case of payment or liquidation of financial obligations to the taxpayer (during mutual settlements and other similar cases), the time of payment or liquidation of the liability shall be considered as the time of expenditure.
If the term of the lease agreement when the payment is made for renting the property or the term of the debt obligation when the interest on the debt obligations is paid covers several reporting periods, then the amount of the rent calculated and actually paid as a deduction from the income in the reporting year means the amount of the rent calculated for that year .
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