part 8 A OEY MM cthodss and Installment Reporting of Income ACCOUNTING PERIODS KINDS 1) Calendar Year 2) Fiscal Year INSTANCES WHEN USE OF CALENDAR YEAR IS REQUIRED ‘Taxable income shall be computed on the basis of calendar year in the following cases: If the taxpayer’s annual accounting period is other than a fiscal year; 2. If the taxpayer has no annual accounting period; 3. If the taxpayer does not keep books of accounts 4. If the taxpayer is an individual. (Section 43, RA 8424) SHORT PERIOD RETURN SHORT PERIOD RETURN ‘Accounting period may be Jess than twelve (12) months (Short Accounting Period) may arise when: 1, A corporation is newly organized 2. When a corporation is dissolved 3. When the taxpayer dies 4. When a corporation changes accounting period ACCOUNTING METHODS 1) Cash method 2) Accrual method 3) Crop basis 4) Percentage of completion 5) Installment method 351Cre hy Dent. Reporting oof ) Accounting NV tethed ad ‘nstellnent ee 4 of Vicon, me MPLETION PERCENTAGE OF CO! i of completion method is OY allowed in case of “long-term Percentage contracts”. “Long-term contracts” means building, installation oF construction os covering 3 period in ‘excess of one (1) Year Contra INSTALLMENT METHOD “THE FOLLOWING SALES MAY BE REPORTED ON INSTALLMENT BASIS; - These include sales by persons 1) Sales of Dealers in Personal Property, whe ; regularly sell or otherwise dispose of personal property on the instalmeng plan. : include casual sales or sles of Personal Property - These *. ES depostion of personal property (other than property of a kind which are ordinarily included in the inventory of the taxpayer), provided: a. The selling price exceeds P1,000; and ae b. The initial payments do not exceed 25% of selling price. 3) Sales of Real Property - These include sales of real property on the installment plan, provided: The initial payments do not exceed 25% of the selling price. 4) Sales of Real Property Considered as Capital Assets by individuals - Ay individual taxpayer who sells real property considered as capital assets and the I.P. do not exceed 25% of the selling price may pay the capital gains tax in installments. FORMATS OF COMPUTATION 4. Seling Price (SP) Cash received P XXX FMV of the property received XXX Receivables XK Unpaid mortgage assumed by the buyer XXX Selling Price PXXX 2. Contract Price (CP) Selling Price Less: Morigage assumed oo ear by the buyer ‘ ne id: Excess unpaid Contac Price 99 overcast ore 352Accounting Meth and Installment Reporting of Income we 3. Initial Payments (IP) Downpayment P XXX Expected installment collections in the year of sale XXX Excess of unpaid mortgage over cost XXX Initial Payments. St Realized Gross Profit (RGP) (if sale is subject to basic tax) RGP = Collections x Gross Profit Rate Gross Profit Rate = Gross Profit/Contract Price Installment Capital Gains Tax Installment CGT = Total CGT x Collection/CP 353 |