Transilvania University Faculty of Economic Sciences and Business Administration Business Administration Specialization

Taxation

Manole Andrei Year II Group 8891

Brasov -2011-

Contents
Chapter 1 .................................................................................................................................... 3 Theoretical consideration regarding taxes and fees ................................................................... 3 1.1 General Consideration Regarding Taxes and Fees .......................................................... 3 1.2 Presentation of direct taxes .............................................................................................. 5 1.2.1 Profit tax.................................................................................................................... 6 1.2.2 Salary tax .................................................................................................................. 7 1.2.3 Dividend tax .............................................................................................................. 8 Characterization of dividend income ................................................................................. 8 Controversy ........................................................................................................................ 9 Dividend Tax Policy ........................................................................................................ 10 Other countries ................................................................................................................. 12 1.2.4 Local tax.................................................................................................................. 14 1.3 Presentation of indirect taxes ..................................................................................... 15 1.3.1 VAT ........................................................................................................................ 16 1.3.2 Duty......................................................................................................................... 17 1.3.3 Excise ...................................................................................................................... 18 Chapter 2 .................................................................................................................................. 19 Companys Presentation .......................................................................................................... 19 2.1. Short History ................................................................................................................. 19 2.2. Organizational Structure ............................................................................................... 19 2.4 Activity .......................................................................................................................... 21 Chapter 3 .................................................................................................................................. 22 Case Study ............................................................................................................................... 22 3.1 Monograph accounting .................................................................................................. 22 3.2. Calculate and Record in Accounting Taxes and Fees Paid by the Company During the Month of Your Choice (Direct Taxes and Indirect Taxes) .................................................. 29 3.3 Prepare a Trial Balance at the end of the Period ............................................................ 29 3.4 Prepare an Abridged Balance Sheet ............................................................................... 31 Bibliography ........................................................................................................................ 32

Chapter 1 Theoretical consideration regarding taxes and fees

1.1 General Consideration Regarding Taxes and Fees
Taxes represent a contribution of money that we make to the government. This contribution is compulsory, levied by law. This means that a portion of your income is given to the government. Additionally, taxes are also contributions that are paid as an additional cost to some goods and services, such as the gasoline taxes we pay, or the sales tax that a state might charge. In some cases, taxes are levied on the value of property you own, such as real estate taxes, or a premium added to your vehicle registration based on the value of your car. Taxes are also imposed by many subnational entities. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid labour). A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government [] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."[1] In modern taxation systems, taxes are levied in money; but, in-kind and corve taxation are characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. When taxes are not fully paid, civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration)[2] may be imposed on the non-paying entity or individual. Money provided by taxation has been used by states and their functional equivalents throughout history to carry out many functions. Some of these include expenditures on war, the enforcement of law and public order, protection of property, economic infrastructure (roads, legal tender, enforcement of contracts, etc.), public works, social engineering, and the operation of government itself.
1 2

Black's Law Dictionary, p. 1307 (5th ed. 1979). 26 U.S.C. 7203 in the case of U.S. Federal taxes.

Governments also use taxes to fund welfare and public services. These services can include education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public utilities. Colonial and modernizing states have also used cash taxes to draw or force reluctant subsistence producers into cash economies. Governments use different kinds of taxes and vary the tax rates. This is done to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as business, or to redistribute resources between individuals or classes in the population. Historically, the nobility were supported by taxes on the poor; modern social security systems are intended to support the poor, the disabled, or the retired by taxes on those who are still working. In addition, taxes are applied to fund foreign aid and military ventures, to influence the macroeconomic performance of the economy (the government's strategy for doing this is called its fiscal policy; see also tax exemption), or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive. A nation's tax system is often a reflection of its communal values or/and the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burdenwho will pay taxes and how much they will payand how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing the tax system, these choices reflect the type of community that the public and/or government wishes to create. In countries where the public does not have a significant amount of influence over the system of taxation, that system may be more of a reflection on the values of those in power. All large businesses incur administrative costs in the process of delivering revenue collected from customers to the suppliers of the goods or services being purchased. Taxation is no different, the resource collected from the public through taxation is always greater than the amount which can be used by the government. The difference is called compliance cost, and includes for example the labour cost and other expenses incurred in complying with tax laws and rules. The collection of a tax in order to spend it on a specified purpose, for example collecting a tax on alcohol to pay directly for alcoholism rehabilitation centres, is called hypothecation. This practice is often disliked by finance ministers, since it reduces their freedom of action. Some economic theorists consider the concept to be intellectually dishonest since, in reality, money is fungible. Furthermore, it often happens that taxes or excises initially levied to fund some specific government programs are then later diverted to the government general fund.
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In some cases, such taxes are collected in fundamentally inefficient ways, for example highway tolls, this is also true of privately funded roads. Some economists, especially neo-classical economists, argue that all taxation creates market distortion and results in economic inefficiency. They have therefore sought to identify the kind of tax system that would minimize this distortion. Also, one of every government's most fundamental duties is to administer possession and use of land in the geographic area over which it is sovereign, and it is considered economically efficient for government to recover for public purposes the additional value it creates by providing this unique service. Since governments also resolve commercial disputes, especially in countries with common law, similar arguments are sometimes used to justify a sales tax or value added tax. Others (e.g. libertarians) argue that most or all forms of taxes are immoral due to their involuntary (and therefore eventually coercive/violent) nature. The most extreme anti-tax view is anarcho-capitalism, in which the provision of all social services should be voluntarily bought by the person(s) using them.

1.2 Presentation of direct taxes

In the general sense, a direct tax is one paid directly to the government by the persons (juristic or natural) on whom it is imposed (often accompanied by a tax return filed by the taxpayer). Examples include some income taxes, some corporate taxes, and transfer taxes such as estate (inheritance) tax and gift tax. In this sense, a direct tax is contrasted with an indirect tax or "collected" tax (such as sales tax or value added tax (VAT)); a "collected" tax is one which is collected by intermediaries who turn over the proceeds to the government and file the related tax return. Some commentators have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be."[3] Direct tax: U.S. constitutional law According to the U.S. constitutional law, a direct tax is the charge on property by reason of it's ownership.

Britannica Online, Article on Taxation

Direct tax in India: In India, all the direct tax related matters are taken care by the Central Board of Direct Taxes (CBDT), which is a significant division of the Department of Revenue, Ministry of Finance, Government of India. CBDT is functioning under the Central Board of Revenue Act 1963. CBDT is responsible for formulating and enforcing direct taxes in India. One of the vital functions of CBDT is to administer direct taxes law followed by Income Tax Department The tax system in India is primarily demarcated under the control of Central and State Government. The Central Government is primarily responsible for imposing taxes on income, custom duties, central excise and service tax. The State Government is responsible for levying taxes like State Excise, stamp duty, VAT (Value Added Tax), land revenue and professional tax. The local bodies are also authorized to impose tax on properties, octroi and many more. EU direct taxation case law is developing fast, demonstrating that in many Member States tax regulations or their application are in breach of Community law. A number of cases showed that many companies operating across Europe can be affected by the developments of European Court of Justice (ECJ) case law.

1.2.1 Profit tax

Tax profit or taxable profit is used to distinguish between accounting profit or earnings (the number that is generally referred to in financial results for public companies and quoted in the press). Taxable profit is the number that is used to calculate tax on income. For a number of reasons, taxable profit may differ from reported earnings, and may be higher or lower.Company financial reports often distinguish between profit before tax and after-tax profit. Depending on the reason for the differences between profit before tax and taxable profit, the company may show a deferred tax or tax asset to account for future taxes. Depending on the circumstances and accounting standards, taxes paid in cash and taxes shown on the profit and loss statement may also differ. Taxable profit is rarely shown in the published financial statements. Due to the differences between nominal tax rates and actual taxes paid, analysts sometimes refer to the effective tax rate, which is (actual) taxes divided by profit before tax. In the example above, the effective tax rate would be 10%.
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In the UK tax system, more specifically, for UK corporation tax, PCTCT stands for "profits chargeable to corporation tax," a UK term for taxable profits. The PCTCT of a company is derived from a company's profit as shown in the profit and loss account in its accounts, with the addition of any disallowed expenditure, and the deduction of any expenditure that is allowed for tax purposes and has not been deducted in the profit and loss account. Some systems provide tax exemption for some types of income. Many systems impose tax at different rates for differing types (e.g., capital gains or salaries) or levels of income (e.g., graduated rates). In the United States, gross income includes all income realized from whatever source, but excludes particular tax exempt items, such as municipal bond interest. In 2010, the United Kingdom and the United States both provided reduced rates of tax for capital gains and dividends. Most systems and jurisdictions allow business taxpayers to reduce taxable income by cost of goods or other property sold, as well as deductions for business expenses. Many systems limit some sorts of business deductions. For example, deductions for automobile expenses are limited in the United Kingdom and United States. Some systems allow tax deductions for certain nonbusiness expenses. Such deductions may include personal expense items, such as a home mortgage interest deduction, and vary widely by jurisdiction. In addition, many systems allow deductions for personal allowances or a minimum deemed amount of personal deductions. The United States Federal system allows a deduction for personal exemptions, as well as a minimum standard deduction in lieu of other personal deductions. Some states in the United States allow few personal deductions. France, Germany, Belgium, Italy and Spain have very risen profit taxes, more than 30%, but Bulgaria, Cyprus, Ireland, Latonia, Poland, Slovakia have profit taxes less than 20%.

1.2.2 Salary tax

Payroll4 tax generally refers to two different kinds of similar taxes. The first kind is a tax that employers are required to withhold from employees' wages, also known as withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG).
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http://www.wisegeek.com/what-is-payroll.htm

The second kind is a tax that is paid from the employer's own funds and that is directly related to employing a worker, which can consist of a fixed charge or be proportionally linked to an employee's pay. The way in which the salaries are calculated: 1. Gross salary 2. Private contributions (a+b+c) a. CAS - social security 10,5% * (1) b. CASS - contribution to health insurance 5,5 % * (1) c. CFS - contribution to unemployment fund 0,5% * (1) 3. Net salary (1-2) 4. Private money deduction (250 lei per month for each working person) 5. Other 100 lei (is added both for each person younger than 18 and each retired person whose monthly pension is less than 251 lei) 6. The taxable income (3-4-5) 7. Salary tax (16% * (6)) 8. The salary (sum of money received by the end of the month) (1-2-7) The employers contribution: 1. 2. 3. 4. 5. 6. 7. Companys contribution to social security: 20,8% Companys contribution to health insurance : 5,2% Vocation allowance : 0,85% Companys contribution to unemployment fund : 0,5% Other personnel - related debts - industrial accident : 0,4 - 2% Special funds - taxes and similar liabilities - collateral fund : 0,25% ITM contributions (work cards) : 0,75

1.2.3 Dividend tax

Characterization of dividend income In most jurisdictions worldwide, dividend payments are considered ordinary income and are taxed as such, the same as if the taxpayer had earned the income working at a job. Other jurisdictions separate dividend income and characterize it as something other than ordinary income subject to different tax rates if taxed at all.

Controversy Depending on the jurisdiction dividend income along with interest income, collected rents, or other "unearned income" may also be taxed and is the subject of recurring debate as to whether or not these taxes should be eliminated. Arguments against Abolitionists argue that a dividend tax amounts to unfair "double taxation". Since a company has already paid a corporate tax on these profits, this means that the shareholders, as part owners, have been taxed already.[5] The term "double taxation" is sometimes used (unconventionally[6]) by opponents of the dividend income tax for investors. Others argue that the dividend taxes adds to and serves as a justification for management's built in bias for growth, even when such growth does not add to shareholder returns.[7] Norway does not "double tax": "To avoid (economic) double taxation, shareholders receiving dividends from Norwegian limited companies, [are] entitled to full credit.... Consequently dividends from Norwegian companies were in practice tax free on the hands of the shareholder". It is true that a corporation is an independent entity that has a "life of its own". However, the logical consequence of that view is that dividends do not represent income to the corporation, but are rather an expense to the corporation (like employee salaries), and thus should be deductible on corporate income tax returns like any other business expense. Arguments in favor A corporation is a legal entity that can own property, sue or be sued, and enter into contracts. The corporation is, therefore, separate from its shareholders with a "life" of its own. As a separate entity, a corporation has the right to use public goods as an individual does, and is therefore obligated to help pay for the public goods through taxes. Additionally, as described by Professor Confidence W. Amadi:

5 6

The Cato Institute Taxation authorities world-wide use the term double taxation to mean that taxation is levied by two or more different jurisdictions on the same gain. This is often mitigated by tax treaty. 7 http://www.marshalla.com/articles/doubletax.htm

The greatest advantage of the corporate form of business organization is the limited liability protection accorded its owners. Taxation of corporate income is the price of that protection. This price must be worth the benefits since, according to the Internal Revenue Service (1996), corporations account for less than 20 percent of all U.S. business firms, but about 90 percent of U.S. business revenues and approximately 70 percent of U.S. business profits. The benefits of limited liability independent of those enjoyed by shareholders, the flexibility of change in ownership, and the immense ability to raise capital are all derived from the legal entity status accorded corporations by the law. This equal status requires that corporations pay income taxes. Although the above is an argument for corporate taxation as opposed to the taxation of dividends, arguments for the taxation of income from capital would apply to both and on that count it can be argued that from a social policy standpoint it is unfair to tax income generated through active work at a higher rate than income generated through less active means (although it might be said in defense that the ability to generate a material amount of dividend income can depend on years spent in active work pursuits). Proponents make the related point that reducing or eliminating dividend taxes helps the wealthiest individuals who can afford to buy large quantities of stock, as they could feasibly live off the dividend payments without any income tax on their earnings. There are also worries that companies may not have paid their full share of income tax due to legislated tax preferences. Dividend Tax Policy United States In 2003, President George W. Bush proposed to eliminate the U.S. dividend tax saying that "double taxation is bad for our economy and falls especially hard on retired people". He also argued that while "it's fair to tax a company's profits, it's not fair to double-tax by taxing the shareholder on the same profits. Soon after, Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003 ("JGTRRA"), which included some of the cuts Bush requested and which he signed into law on May 28, 2003. Under the new law, qualified dividends are taxed at the same rate as long-term capital gains, which is 15 percent for most individual taxpayers. Qualified dividends received by individuals in the 10% and 15% income tax brackets were taxed at 5% from 2003 to 2007. The qualified dividend tax rate was set to expire December 31, 2008; however, the Tax Increase Prevention and Reconciliation Act of 2005 ("TIPRA") extended the lower tax rate through 2010 and further cut the tax rate on qualified dividends to 0% for individuals in the 10% and 15% income tax
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brackets. On December 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. The legislation extends for two additional years the changes enacted to the taxation of dividends in the JGTRRA and TIPRA. Canada In Canada, there is taxation of dividends, but tax policy attempts to compensate for this through the Dividend Tax Credit or DTC for personal income in dividends from Canadian corporations. An increase to the DTC was announced in the fall of 2005 by Liberal finance minister Ralph Goodale just prior to the fall of the Liberal minority government, in conjunction with the announcement that Canadian income trusts would not become subject to dividend taxation as had been feared. Effective tax rates on dividends will now range from negative to over 30% depending on income level and different provincial tax rates and credits.. India In India, earlier dividends were taxed in the hands of the recipient as any other income. However since 1 June 1997, all domestic companies were liable to pay a dividend distribution tax on the profits distributed as dividends resulting in a smaller net dividend to the recipients. The rate of taxation alternated between 10% and 20% until the tax was abolished with effect from 31 March 2002.The dividend distribution tax was also extended to dividends distributed since 1 June 1999 by domestic mutual funds, with the rate alternating between 10% and 20%[] in line with the rate for companies, up to 31 March 2002. However, dividends from open-ended equity oriented funds distributed between 1 April 1999 to 31 March 2002 were not taxed. Hence the dividends received from domestic companies since 1 June 1997, and domestic mutual funds since 1 June 1999, were made non-taxable in the hands of the recipients to avoid double-taxation, until 31 March 2002. The budget for the financial year 20022003 proposed the removal of dividend distribution tax bringing back the regime of dividends being taxed in the hands of the recipients and the Finance Act 2002 implemented the proposal for dividends distributed since 1 April 2002. This fueled negative sentiments in the Indian share markets causing stock prices to go down However the next year there were wide expectations for the budget to be friendlier to the markets and the dividend distribution tax was reintroduced.

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Hence the dividends received from domestic companies and mutual funds since 1 April 2003 were again made non-taxable at the hands of the recipients. However the new dividend distribution tax rate for companies was higher at 12.5%, and was increased with effect from 1 April 2007 to 15%.Also, the funds of the Unit Trust of India and open-ended equity oriented funds were kept out of the tax net. The taxation rate for mutual funds was originally 12.5% but was increased to 20% for dividends distributed to entities other than individuals with effect from 9 July 2004. With effect from 1 June 2006 all equity oriented funds were kept out of the tax net but the tax rate was increased to 25% for money market and liquid funds with effect from 1 April 2007. Dividend income received by domestic companies until 31 March 1997 carried a deduction in computing the taxable income but the provision was removed with the advent of the dividend distribution tax A deduction to the extent of received dividends redistributed in turn to their shareholders resurfaced briefly from 1 April 2002 to 31 March 2003 during the time the dividend distribution tax was removed to avoid double taxation of the dividends both in the hands of the company and its shareholders[ but there has been no similar provision for dividend distribution tax. However the budget for 20082009 proposes to remove the double taxation for the specific case of dividends received by a domestic holding company (with no parent company) from a subsidiary that is in turn distributed to its shareholders. Other countries In Australia dividends are taxed at the recipient's marginal tax rate (up to 45% from 1 July 2006). Australia (like New Zealand) has a Dividend Imputation system which allows franking credits to be attached to dividends. This allows recipients of franked dividends to impute (or credit) the corporate tax paid by the paying company. A recipient of a fully franked dividend on the top marginal tax rate will effectively pay only about 15% tax on the cash amount of the dividend. In Austria the KeSt (Kapitalertragssteuer) is used as dividend tax rate, which is 25% on dividends. In Belgium there is a tax of 25% (or 15% under certain conditions) on dividends, known as "roerende voorheffing" (in Dutch) or "prcompte mobilier" (in French). In Bulgaria there is a tax of 5% on dividends.
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In China, the dividend tax rate is 20%, but since June 13, 2005, 50% of the dividend is taxed. In Hong Kong, there is no dividend tax.

In the Czech Republic there is a tax of 15% on dividends. This was meant to be reduced to 12.5% for 2009. According to Leos Jirasek, Senior Trade & Investment Adviser, British Embassy, Prague - Trade & Investment Section, the Parliament of the Czech Republic will be discussing an amendment to the Tax Act No. 586/1992 as amended on 25 November 2008. If the amendment gets approved, the withholding tax on dividends (part of personal income tax) of physical persons in 2009 will NOT be 12.5%, as specified by the Act No. 261/2007, but will remain 15%. In Finland, there is a tax of 19.6% on dividends (70% of dividend is taxable capital income and capital gain tax rate is 28%). However, effective tax rate is 40.5% for private person. That's because corporate earnings have already been taxed, so dividends are double taxed. Corporate income tax is 26.0%. In Japan, there is a tax of 10% on dividends from listed stocks (7% for Nation, 3% for Region) while Jan 1st 2009 - Dec 31 2012, by tax reduction rule. After Jan 1st 2013, the tax of 20% on dividends from listed stocks (15% for Nation, 5% for Region). In case of an indivisual person who has over 5% of total issued stocks (value or number), he/she can not apply the tax reduction rule, so after Jan 1st 2009, should pay 20%(15%+5%). There is a tax of 20% on dividends from Non-listed stocks (20% for Nation, 0% for Region).[22] In Iran there are no taxes on dividends, according to article (105). In Ireland, companies paying dividends must generally withhold tax at the standard rate (as of 2007, 20%) from the dividend and issue a tax voucher to include details of the tax paid. A person not liable to tax can reclaim it at the end of year, while a person liable to a higher rate of tax must declare it and pay the difference. In Israel there is a tax of 20% on dividends. In Italy there is a tax of 12.5% on dividends, known as "capital gain tax". In the Netherlands there is a tax of 15% on dividends. There's also a tax of 1.2% per year on the value of the share, regardless of the dividend, as part of the flat tax on savings and investments.

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In Poland there is a tax of 19% on dividends. This rate is equal to the rates of capital gains and other taxes. In Romania there is a tax of 16% on dividends. In Slovakia, tax residents' income from dividends is not subject to income taxation in the Slovak Republic pursuant to Article 12 Section 7 Letter c) for legal entities and to Article 3 Section 2 Letter c) for individual entities of Income Tax Act No. 595/2003 Coll. as amended. This applies to dividends from profits relating to the calendar year 2004 onwards (regardless of when the dividends were actually paid out). Before that, dividends were taxed as normal income. The stated justification is that tax at 19 percent has already been paid by the company as part of its corporation tax (in Slovak "Income Tax for a Legal Entity"). However, there is no provision for residents to reclaim tax on dividends withheld in other jurisdictions with which Slovakia has a doubletaxation treaty. Foreign resident owners of shares in Slovak companies may have to declare and pay tax in their local jurisdiction. Shares of profits made by investment funds are taxable as income at 19 percent. In Turkey there is an income tax withholding of 15% on dividends. In the United Kingdom, companies pay UK corporation tax on their profits and the remainder can be paid to shareholders as dividends. Basic rate tax payers have no further tax to pay as the dividend is deemed to have been received net of 10% tax. For higher-rate taxpayers, additional tax must be paid at 22.5% of the net dividend received (32.5% less the 10% deemed tax deduction, calculated on the deemed gross payment of the dividend).

1.2.4 Local tax

The City Hall and the local bodies of the state administration want to exercise their power so they need some resources. The local taxes are some incomes for the local budget. An additional tax, usually collected in the form of property taxes.

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The main local taxes are: 1. 2. 3. 4. 5. 6. 7. 8. 9. Tax on buildings Tax on land Tax on transport Tax on issuing certificates, authorizations and visas Tax on advertising Tax on shows Tax on hotels Special tax Other local tax

1.3 Presentation of indirect taxes

In the colloquial sense, an indirect tax (such as sales tax, a specific tax [a tax per unit], value added tax (VAT), or goods and services tax (GST)) is a tax collected by an intermediary (such as a retail store) from the person who bears the ultimate economic burden of the tax (such as the consumer). The intermediary later files a tax return and forwards the tax proceeds to government with the return.

In this sense, the term indirect tax is contrasted with a direct tax which is collected directly by government from the persons (legal or natural) on which it is imposed. Some commentators have argued that "a direct tax is one that cannot be shifted by the taxpayer to someone else, whereas an indirect tax can be."[8] An indirect tax may increase the price of a good so that consumers are actually paying the tax by paying more for the products.[9] Examples would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the manufacturer of the cars; ultimately the manufacturer transfers
8 9

Britannica Online, Article on Taxation Financial Dictionary Online

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the burden of this duty to the buyer of the car in form of a higher price. Thus, an indirect tax is such which can be shifted or passed on. The degree to which the burden of a tax is shifted determines whether a tax is primarily direct or primarily indirect. This is a function of the relative elasticity of the supply and demand of the goods or services being taxed. Under this definition, even income taxes may be indirect.

1.3.1 VAT
A value added tax (VAT) is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs. The "value added" to a product by a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed .It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products. Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT (input tax) on the products and services that they buy in order to produce further goods or services that will be sold to yet another business in the supply chain or directly to a final consumer. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. The VAT quotas in the European Unions countries: Austria 20% Belgium 21% Bulgaria 20% Cyprus 15% Czech Republic
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Denmark 25% Estonia 20% Finland 22% France 19.6% Germany 19% Greece 19% Ireland 21.5% Italy 20% Letonia 21% Lithuania 21% Luxemburg 15% Malta 18% 5% Holland 19% Poland 22% Romania 24% Slovakia 19% Slovenia 20% Spain 16% Sweden 25% UK 17.5% Hungary 25%

1.3.2 Duty
Duty10 fees are sums that are collected by the state because of the export, import or the transit of goods and values. The fee is calculated by applying a quota over the value in the custom.

The value of the goods in the custom is composed by: 1. 2. 3. 4. external price of the goods the transportation expenses of the imported goods to the border filling expenses the insurance cost on exterior

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Financial Times Guide to Inheritance Tax , Probate and Estate Planning Amanda Fisher

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The value from the custom is determined by the person who imports, who is obliged to take a testimony on the customs office regarding the value in the custom, accompanied by invoices and other payment documents of the merchandise. In Romania the duty tax has a quota of 30%.

1.3.3 Excise
An excise or excise tax (sometimes called a duty of excise special tax) is commonly understood to refer to an inland tax on the sale, or production for sale, of specific goods; or, more narrowly, as a tax on a good produced for sale, or sold, within a country. An excise tax is one levied on specific goods or commodities produced or sold within a country, or on licenses granted for specific activities. Excises are distinguished from customs duties, which are taxes on importation. Excises are inland taxes, whereas customs duties are border taxes. An excise is considered an indirect tax, meaning that the producer or seller who pays the tax to the government is expected to try to recover the tax by raising the price paid by the buyer (that is, to shift or pass on the tax). Excises are typically imposed in addition to another indirect tax such as a sales tax or VAT. In common terminology (but not necessarily in law) an excise is distinguished from a sales tax or VAT in three ways: (i) an excise typically applies to a narrower range of products; (ii) an excise is typically heavier, accounting for higher fractions (sometimes half or more) of the retail prices of the targeted products; and (iii) an excise is typically specific (so much per unit of measure; e.g. so many cents per gallon), whereas a sales tax or VAT is ad valorem, i.e. proportional to value (a percentage of the price in the case of a sales tax, or of value added in the case of a VAT). Typical examples of excise duties are taxes on gasoline and other fuels, and taxes on tobacco and alcohol (sometimes referred to as sin tax).

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Chapter 2 Companys Presentation

2.1. Short History
The commercial company Jan Ltd11 was founded in 2011 in Ramnicu Valcea.It was registered in the Commerce Register under the number J38/1136/2011, fiscal code: RO 6334476. It has 9 employees. Jan Company Main objectives of the company are: - milling, - production and trade of milling and bakery - confectionery - trade. The products of the company are: breads,rolls, flour, bagels, waffles and pasta. The companys competition represents commercial companies which have as activity the distribution production and trade of milling and bakery. The accounting of the company is developed in a distinct department with certified accountants. The organization of the accounting is made by the general manager who coordinates the economic activity in the society.

2.2. Organizational Structure

An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims. It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment. Many organizations have hierarchical structures, but not all. Organizations are a variant of clustered entities.
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www.firme.info

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An organization can be structured in many different ways, depending on their objectives. The structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. Organizational structure affects organizational action in two big ways. First, it provides the foundation on which standard operating procedures and routines rest. Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organizations actions. The organizational structure of Jan Ltd. Is not very complicated because the company does not have a large number of employees.

General Manager

Accountant

Secretary

Workers

Drivers

1 General Manager 1 Accountant 1 Secretary 4 Workers 2 Drivers

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2.3 Trading partners

S.C. Meredith S.R.L. S.C. Mimi Zup S.R.L. S.C. Bertis S.R.L. S.C. Tomis S.R.L. S.C. Darius S.R.L. S.C. Loreta S.R.L.

2.4 Activity
Our company is one of the best and provides bakery and milling services in Covasna County at competitive prices.All of this combined with good taste and quality made the recipe for surviving on this market. Jan Company Main objectives of the company are: - milling, - production and trade of milling and bakery - confectionery - trade. The products of the company are: breads,rolls, flour, bagels, waffles and pasta. The companys competition represents commercial companies which have as activity the distribution production and trade of milling and bakery.

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Chapter 3 Case Study 3.1 Monograph accounting

1.The shareholders made Jan S.R.L. with a capital of 10000 on 01.01.2011. P-D OE+C 456=1011 / 10.000 RON Transactions with shareholders=Subscribed and not paid in share capital 2.Shareholder deposits in the new created account at BCR Brasov. A+D P+C 5121=456 / 10.000 RON Cash at bank= Transactions with shareholders 3.From subscribed and not paid goes to subscribed and paid capital. P-D P+C 1011=1012 / 10.000 RON Subscribed and not paid=Subscribed and paid 4.On 03.01.2011 with the invoice no. 1010 the company buys raw materials in value of 5000 RON. A+D P+C 301=401 / 5000 RON Raw Materials=Suppliers 5.The company pays the raw materials bought on 03.01.2011 by payment order no. 2011 . P-D A-C 401=5121 / 5000 RON Supliers=Cash at Bank 6.We register the finished goods on 04.01.2011 at a production cost of 5500 RON. A+D A-C 345=711 / 5500 RON 601=301 / 1500 RON Finished Goods= Revenues associated with the costs of the completed production
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7.Products are sold on 04.01.2011 with the invoice no. 1011 with the value 7000 RON. A+D A-C 4111=701 / 7000 RON Customers= Sales of finished goods 8.We register the selling of the goods from the database on 04.01.2011. A+D A-C 711=345 / 5500 RON Revenues associated with the costs of the completed production=Finished Goods 9.On 05.01.2011 we take a bank loans in value of 50.000 RON. A+D P+C 5121=1621 / 50.000RON Cash at Bank=Long-term bank loans 10.At the end of the month we register interest we have to pay in value of 2000 RON. P+D P-C 666=1682 / 2000 RON Accrued interest on long-term bank loans=Interest Expense

11.On 07.01.2011 we receive in the bank account 5000 RON from clients. A+D,5121=% / 5000 RON A-C,4111 / 5000 RON Cash at Bank=% Customers 12.On 09.01.2011 the shareholders credit the companys cash desk with 15.000 RON. A+D P+C 5311=4551 / 15.000 RON Petty Cash=Transactions with Shareholders 13.A land in value of 70.000 RON is bought on 11.01.2011. A+D P+C 2111=404 / 70.000 RON Land= Suppliers of non-current assets

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14.On 12.01.2011 the company buys materials in value of 3000 with the invoice no.1012 and VAT 24%. %= 401,P+C / 3720 RON 371,A+D 3000 RON 4426,A+D 720 RON % =Suppliers Goods purchased for resale Input VAT 15.On 14.01.2011 the company delivers goods of 5000 RON and 24% VAT. A+D,4111=% / 6200 RON 4427,1200 P+C 707,5000 P+C Customers=% Output VAT Sale of goods purchased for resale 16.The cost of sold merchandise is 2800 RON. A+D A-C 607=371 / 2800 RON Goods for resale= Goods purchased for resale

17.The company buys fuel based on shipping advice in value of 3000 RON.Later,on 15.01.2011 the company will receive invoice. %= 408,P+C / 3720 RON A+D,3022 3000 RON A+D,4428 720 RON %= Suppliers - invoices to be received Fuel VAT under settlement 18.The company receives the invoive and registers the fuel bought. P-D P+C 408=401 / 3720 RON Suppliers - invoices to be received=Suppliers 4426=4428 / 720 RON

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19.The company delivers with invoice no. 1013 in value of 3500 RON and VAT 24%.The cost of the fuel bought on 17.01.2011 is 800 RON. a)the fuel is transferred to materials A+D A-C 371=3022 / 800 RON Goods purchased for resale=Fuel b)Registering the revenues received with invoice from selling goods. A+D,4111 =% / 4340 RON P+C,707 /3500 RON P+C,4427 / 840 RON c)Unloading them from the program. A+D A-C 607=371 / 800 RON Raw Materials = Goods purchased for resale 20.On 18.01.2011 the company buys raw materials with invoice no.1014 in value of 8000 RON. A+D P+C 301=401 / 8000RON Raw Materials = Suppliers

21.On 18.01.2011 we open a letter of credit in value of 8000 RON available to third parties and the company pays a commission of 300 RON. Internal Transfers 581=5121 Cash at bank / 8000 RON Letters of credit 541=581Internal Transfers / 8000 RON Suppliers 401=541 Letters of credit / 8000 RON P-D A-C 627=5121 / 300 lei Suppliers = Cash at Bank 22.Company registers the finished goods at the production costs of 11.000 RON on 20.01.2011. A+D A-C 345=711 / 11.000 RON Finished Goods = Revenues of the completed production

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23.On 20.01.2011the company sells the product with 13.000 RON on the invoive no.1015 . A+D P+C 4111=701 / 13.000 RON Customers = Sales of finished products 24.We register the selling of the goods on 20.01.2010. A+D A-C 711=345 / 11.000 RON Reveneues of the completed production = Finished Goods 25. On 23.01.2011 the company pays the wages taxes comprising social security,unemployment fund,insurances and employee contributions. 641=421 / 4020 RON 421.1=444 / 435 RON 421.1=4312 / 423 RON 421.1=4314 / 222 RON 421.1= 4372 / 21 RON 6451=4311 / 837 RON 6451=4311 / 6 RON 6453=4313 / 210 RON 6452=4371 / 21 RON 6453=4313 / 33 RON 6452=4371 / 9 RON 4211=5311 / 2919 RON Salaries=Employees Employees=Tax on salaries Employees= Employees contribution to pension fund Employees=Employees contribution to health insurance Employees=Employees contribution to unemployment fund Companys contribution to social security=Companys contribution to social security Companys contribution to social security=Companys contribution to social security Companys contribution to health insurance=Companys contribution to health insurance Companys contribution to unemployment fund=Companys contribution to unemployment fund Companys contribution to health insurance=Companys contribution to health insurance
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Companys contribution to unemployment fund=Companys contribution to unemployment fund Employees=Petty cash 26.On 24.01.2011 the company pays materials for packaging. 3023=401 / 8000 RON A+D A-C 6023=381 / 5000 RON Packaging materials = Packaging materials 27.On 25.01.2011 the company pays the utilities in value of 3000 RON. A+D A-C 605=5311 / 3000 RON Electricity, heating and water = Petty cash 28.On 25.01.2011 the company pays the advertising company. A+D A-C 623=5311 / 7000 RON Entertaining, promotion and advertising= Petty Cash 29.On 27.01.2011 with the invoice no.1015 are bought: paper for the cash register in value of 2300 RON and iron and cement in value of 5000 RON. A+D 214=P+C,404 / 2300 RON A+D,3028=P-C,401 5200 RON Fixtures and fittings=Suppliers of non-current assets Other consumables=Suppliers 30.On 29.01.2011 the company registers the VAT account closing . P-D,4427=4426 A-C / 1440 RON P-D,4427=4423 P+C / 600 RON

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31.On 29.01.2011 the company registers the expenses and revenues account closing. Expenses A+D 121=% 26036 6023 A-C 5000 605 A-C 3000 607 A-C 3600 623 A-C 7000 627 A-C 300 641 A-C 4020 645 A-C 843 6452 A-C 30 6453 A-C 243 666 A-C 2000 -interest expense (666) -goods for resale (607) -packaging materials (6023) -electricity,heating,water (605) -entertaining,promotion and advertising (623) -bank commissions ( 627) -salaries (641) -social security contributions (645) -companys contribution to unemployment fund( 6452 ) -companys contribution to health insurance (6453 ) P-D %=121 P+C Revenues 28500 701 20000 707 8500 -sales of finished goods (701) -sale of goods purchased for resale (707) Gross Profit= total revenues-total expenses=28500-26036=2464 32.Profit Tax 16%. 691=4411 / 154 RON 33.Closing the expense with the profit tax. 121=691 / 154 RON

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3.2. Calculate and Record in Accounting Taxes and Fees Paid by the Company During the Month of Your Choice (Direct Taxes and Indirect Taxes) Indirect taxes VAT
P-D,4427=4426 A-C / 1440 RON P-D,4427=4423 P+C / 600 RON

Direct taxes salary

1. Gross salary = 2000 lei 2. Private contribution (a+b+c) = 330 a. CAS - social security 10.5% * (1) = 210 b. CASS -contribution to health insurance 5,5% * (1) = 110 c. CFS contribution to unemployment fund 0.5% * (1) = 10 3. Net salary (1-2) = 1670 4. Private money deduction (270 lei/month for each working person) 5.Other 110 lei (is added both for each person younger than eighteen and each retired person whose monthly pension is less than 250 lei) 6. The taxable income (3-4-5) = 1290 7. Salary tax (16% * (6)) = 206.4 8. The salary (sum of money received by the end of the month) (1-2-7) = 1463.6 lei

3.3 Prepare a Trial Balance at the end of the Period Trial Balance in 31.01.2011
Symbol of account 121 214 408 301 302 345 401 4111 371 421 4411 Accounts name Profit or loss Fixtures and fittings Suppliers - invoices to be received Raw materials Consumables Finished goods Suppliers Customers Goods purchased for resale Salaries owed to employees Income tax Total previous amounts Debit Credit 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Stock turnover of the current month Debit Credit 27690 28500 2300 0 3720 3720 13000 16200 16500 13000 30540 4520 4020 0 1500 5800 16500 34360 5000 3600 4020 154 Total amounts Debit 27690 2300 3720 13000 16200 165000 13000 30540 4520 4020 0 Credit 28500 0 3720 1500 5800 16500 34360 5000 3600 4020 154 Final balance Debit 0 2300 0 11500 10400 0 0 25540 920 0 0 Credit 810 0 0 0 0 0 21360 0 0 0 154

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456 1011 1012 1621 2111 691 6453 6452

6451 641 627 601 581 5411 4551 444 4372 4371 4314 4313 4312 4311 3028 3023 3022 1682 4428 4423 4426 4427 5121 5311 623 607 6023 666 707 701 711

605 404 TOTAL

Settlements on capitals Subscribed and unpaid capital Subscribed and paid capital Long term bank loans Land Income tax Companys contribution to health insurance Companys contribution to unemployment fund Company contribution social security Salaries Bank Comissions Raw Materials Internal Transfers Letters of credit Shareholders current accounts Tax on salaries Unemployment Fund(e) Unemployment Fund(c) Health Insurance(e) Health Insurance(c) Pension Fund Contribution to social security Other consumables Packaging materials Fuel Accrued interest on longterm bank loans VAT under settlement VAT payable VAT deductible VAT collected Bank account in lei Cashier in lei Entertaining,advertising and promotion Goods for resale Packaging materials Expenses with interest Sale of goods purchased for resale Sales of finished goods Revenues associated with the costs of the completed production Electricity, heating and water Suppliers of non-current assets 0

0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0

10000 10000 0 0 70000 154 243 30

10000 10000 10000 50000 0 154 243 30

10000 10000 0 0 70000 154 243 30

10000 10000 10000 50000 0 154 243 30

0 0 0 0 70000 0 0 0

0 0 10000 50000 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

843 4020 300 1500 8000 8000 0 0 0 0 0 0 0 0 5200 8000 3000 0 720 0 1440 2040 65000 15000 7000 3600 5000 2000 8500 20000 16500

843 4020 300 1500 8000 8000 15000 435 21 30 222 243 423 843 0 5000 800 2000 720 600 1440 2040 13300 12919 7000 3600 5000 2000 8500 20000 16500

843 4020 300 1500 8000 8000 0 0 0 0 0 0 0 0 5200 8000 3000 0 720 0 1440 2040 65000 15000 7000 3600 5000 2000 8500 20000 16500

843 4020 300 1500 8000 8000 15000 435 21 30 222 243 423 843 0 5000 800 2000 720 600 1440 2040 13300 12919 7000 3600 5000 2000 8500 20000 16500

0 0 0 0 0 0 0 0 0 0 0 0 0 0 5200 3000 2200 0 0 0 0 0 51700 2081 0 0 0 0 0 0 0

0 0 0 0 0 0 15000 435 21 30 222 243 423 843 0 0 0 0 0 600 0 0 0 0 0 0 0 0 0 0 0

0 0

0 0 0

3000 0 394380

3000 72300 394380

3000 0 394380

3000 72300 394380

0 0 174441

0 72300 174441

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3.4 Prepare an Abridged Balance Sheet

ASSETS SUM
Fixed Assets-Tangible:Land Fixtures,fittings and equipment Current assets-Raw materials Current assets- Fuel Current assets-Packaging Current assets-Consumables Current assets-Finished goods 70000 2300 11500 2200 3000 5200 920 25540 51700 2081 Capital and reserves:Subscribed capital Capital and reserves:Profit and Loss Liabilities:Loans Liabilities:Interest Liabilities:Suppliers: Electricity, heating and water Liabilities:Suppliers(Imobilizari) Liabilities:provisions-social insurance

LIABILITIES+OWNERS EQUITY SUM

10000 810 50000 2000 21360 72300 843 423 243 222 30 21 154 600 435 15000

Liabilities:Profit tax Liabilities:Payable VAT Tax on wages Shareholders(current accounts)

174441

174441

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Bibliography
o o o o Black's Law Dictionary, p. 1307 (5th ed. 1979). L. Possler,Gh. Lambru,B. Lambru Contabilitatea Intreprinderii 26 U.S.C. 7203 in the case of U.S. Federal taxes. Cobham, Alex (2007-01)."The tax consensus has failed!". The Oxford Council on Good Governance. o Ross, Michael, L. (2007-01-27). "Does Taxation Lead to Representation?". UCLA Department of Political Science. "Internal Revenue Service". 64.233.169.104. o "luxury tax - Britannica Online Encyclopedia". Concise.britannica.com. o jstor.org o Parkin, Michael (2006), Principles of Microeconomics, p. 134. o Taxes in the Ancient World, University of Pennsylvania Almanac o Olmert, Michael (1996). Milton's Teeth and Ovid's Umbrella: Curiouser & Curiouser Adventures in History, p.41. Simon & Schuster, New York. o Hoffman, Phillipe and Kathryn Norberg (1994), Fiscal Crises, Liberty, and Representative Government o Hoffman, Phillipe and Kathryn Norberg (1994), Fiscal Crises, Liberty, and Representative Government o Gheorghe Ialomieanu, Contabilitate financiar, Editura Infomarket, Braov, 2004 o http:// erc.msh.org/mainpage.cfm o http://ro.wikipedia.org/wiki o http://www.profitandtaxes.com/ o Forbes magazine, Tax/Spending Burden 05-24-04

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