INCOME TAX OF A BUSINESSMAN

SUBJECT TO BASIC - TAX TABLE

PROPRIETOR - OWNER OF SOLE PROPRIETORSHIP

Income tax ng Sole proprietor – determine NET INCOME and proceed to TAX TABLE
Mr. A-OWNER
NAME OF COMPANY MR. A OWNED. - 3A COMPANY
NET INCOME OF 3A COMPANY IS P1,000,000
MAGKANO ANG GROSS INCOME NI MR. A=P1,000,000- PUPUNTA NA SA TAX TABLE,
MAGKANO INCOME TAX NI MR. A=P152,500
The TIN account belongs to the owner
CORPORATION= the tax of corporation is 30 PERCENT INCOME TAX RATE –MULTIPLE TO NET
INCOME
PARTNERSHIP-
A. GENERAL PROFESSIONAL PARTNERSHIP- TAX TABLE PARANG INDIVIDUAL
TAXPAYER ex. SGV SCCOUNTING FIRM
B. GENERAL PARTNERSHIP- 30 PERCENT TAX RATE ON NET INCOME parang
corporation
WHAT IS THE GROSS INCOME OF THE BUSINESSMAN PARTICULARLY THE SOLE PROPRIETORSHIP? NET
INCOME OF THE BUSINESS

MAIN INCOME OF A BUSINESSMAN (COMPOSITION OF GROSS INCOME) NET INCOMEPLUS OTHER

INCOME

1. NET INCOME FROM BUSINESS (MAIN INCOME)

SALES – COST OF SALES- OPERATING EXPENSE = NET INCOME/LOSS –IF TRADING BUSINESS OR
MERCHANDISING BUSINESS

OTHER INCOME NG BUSINESSMAN- NON-OPERATING INCOME

a. Gain on sale of other property
b. Commission income
c. Interest income
d. COMMISSION INCOME
e. DIRECTORS FEE
f. Talent fee
 g. professional

SERVICE INCOME/REVENUE – OPERATING EXPENSE = NET INCOME- service business. Example

barber’s shop,

MANUFACTURING BUSINESS-= SALES - COST OF GOODS MANUFACTURED AND SOLD = GROSS

PROFIT- OPERATING EXPENSE = NET INCOME

2. OTHER INCOME SUBJECT TO BASIC TAX

GROSS INCOME = NET INCOME FROM BUSINESS + OTHER INCOME SUBJECT TO BASIC TAX - P250,000
exclusion

EXAMPLE OF OTHER INCOME

COMMISION INCOME
INTEREST ON RECEIVABLES OR PROMISSORY NOTE
PRIZES BELOW 10,000
DIVIDEND FROM FOREIGN CORP

INCOME TAX NG MGA NEGOSYANTE UNDER THE train law

1. 8 percent income tax rate- Optional – business whose annual net sales plus non-operating
income is 3million and below in a year –optional

FOR EXAMPLE – SINGLE PRORIETORSHIP HAS THE FOLLOWING DATA FOR 2022
SALES REVENUE……………………………………………. 3,000,000
COST OF SALES………………………………………………1,800,000 X
OPERATING EXPENSE……………………………………… 600,000 X
Required under THE 8 percent TAX RATE
1. Cost of sales and operating expenses are not considered in the computation
2. Not required to have disbursement book but only sales book
3. Not required to submit audited financial statement
4. Not subject to business tax, such as vat or other percentage tax
5. There is an exclusion of 250,000 to be deducted from sales revenue ON THE FINAL QUARTER

2. UNDER ITEMIZED DEDUCTION- ordinary income statement –annual sales exceeding P3million
pesos
1. SHOULD SUBMIT AUDITED FINANCIAL STATEMENT TO BE ATTACHED TO ITR
2. SHOULD MAINTAINED SALES BOOK AND DISBURSEMENT BOOK-
3. SHOULD PAY BUSINESS TAX – VAT; 12 PERCENTOR OTHER PERCENTAGE TAXES 3 PERCENT
4. TAX TABLE IS USED
VAT- IF ANNUAL SALES EXCEEDING 3MILLION- INPUT TAX; OUTPUT; VAT PAYABLE ARE NEEDED
OTHER PERCENTAGE TAX OF 3 PERCEN OF NET SALES -IF ANNUAL SALES IS 3MILLION AND
BELOW.
BIGASAN – INCOME TAX –EXEMPT SA VAT and OPT exempt sa bigasan
 Parlor- 8 percent
Jolibee – VAT
MALL VAT

PAANO MGBAYAD NG INCOME TAX ANG NEGOSYANTE/

By means of quarterly income tax system.

Example 8 percent- GIVEN DATA

First quarter Second quarter 3rd quarter 4th quarter
Jan 1-March31 APRIL1–JUNE30 JULY 1 – SEPT30 OCT 1- DE31
NET XSALES 400,000 500,000 1,000,000 1,100,000
COST OF SALES/EXPENSES 200,000XX 300,000XX 800,000X 600,000X

LETS COMPUTE QUARTERLY INCOME TAX

First quarter Second quarter 3rd quarter 4th quarter
Jan 1-march31 APRIL1–JUNE30 JULY 1 – SEPT30 OCT 1- DEC
31
NET SALES - CUMULATIVE 400,000 900,000 1,900,000 3,000,00
-250,000
2,750,000
X 8 PERCENT 32,000 72,000 152,000 220,000
32,000 72,000 152,000
40,000 80,000 68,000
WHEN TO PAY-WITHIN 45 AFTER MAY 15 AUG. 15 NOV 15 APRIL 15 OF
THE QUARTER NEXT YEAR
JOURNAL ENTRY
MAY 15. INCOME TAX PAYABLE…………………32,000
CASH……………………………………………………32,000

AUG. 15 INCOME TAX PAYABLE………………..40,000

CASH………………………………………………………40,000

NOV. 15 INCOME TAX PAYABLE 80,000

CASH……………………………………………………80,000

DEC. 31 PROVISION FOR INCOME TAX,,,,,,,220,000

INCOME TAX PAYABLE…………………….220,000

INCOME TAX PAYABLE

5/15 32,000 12/31 220,000

8/15 40,000
 11/15 80,000

152,000 220,000

68,000 TO BE APPERARED IN BALANCE SHEET UNDER CURRENT

LIABILITYExample ITEMIZED- GIVEN DATA
First quarter Second quarter 3rd quarter 4th quarter
Jan 1-march31 APRIL1–JUNE30 JULY 1 – SEPT30 OCT 1- DEC
31
SALES 600,000 700,000 1,300,000 2,100,000
COST OF SALES 200,000 300,000 800,000 600,000
OPERATING EXPENSE 100,000 200,000 300,000 500,000
ANSWER- GIVEN DATA
First quarter Second quarter 3rd quarter 4th quarter
Jan 1-march31 APRIL1–JUNE30 JULY 1 – SEPT30 OCT 1- DEC
31
SALES-CUMULATIVE 600,000 1,300,000 2,600,000 4,700,000
COST OF SALES -200,000 -500,000 -1,300,000 - 1,900,000
GROSS PROFIT 400,000 800,000 1,300,000 2,800,000
OPERATING EXPENSE -100,000 -300,000 - 600,000 -1,100,000
NET INCOME 300,000 500,000 700,000 1,700,000
INCOME TAX-TAX TABLE 7,500 42,500 82,500 327,500
LESS PREVIOUS PAYMENT 7,500 42,500 82,500
INCOME TAX STILL DUE 35,000 40,000 245,000
WHEN TO PAY MAY 15 AUG 15 NOV 15 APRIL 15 OF
NEXT YEAR
INCOME TAX Payable……………………….7,500

Cash……………………………………………………………..7,500

Income tax payable………………………. 35,000

Cash……………………………………………………………35,000

Income tax payable……………………… .40,000

Cash……………………………………………………………40,000

Dec 31 –provision for income tax 327,500

Income tax payable……………………….327,500

BUSINESS TAXES UNDER ITEMIZED DEDUCTION

IF NET SALES VAT INCLUSIVE,THE 12 PERCENT IS INCLUDED IN SELLING PRICE

FIRST QUARTER

400,000 /1.12= 357,142.86

12 PERCENT VAT
 112 PERCENT 100 PERCENT OUTPUT TAX
IF VAT INCLUSIVE 400,000 357,142.86 42,857.14
COST OF SALES 200,000 178,571.43 - 21,428.57 INPUT TAX
OPERATING EXPENSE
EXCEPT 100,000 89,285.71 - 10,714.28 INPUT TAX
PAYROLL/DEPRECIATION
VAT PAYABLE 10,714.29
JOURNAL ENTRY UPON SELLING

CASH…………………………………………………………400,000 1.12
SALES………………………………………………………………….357,142.86 1.00
OUTPUT TAX…………………………………………………….……42,857.14 .12

PURXHASES……………………………………178,571.43
INPUT TAX………………………………………21,428.57
CASH …………………………………………………….200,000

EXPENSES……………………………………… 89,285.71
INPUT TAX………………………………………10,714.28
CASH………………………………………………………….100,000
OUTPUT TAX – INPUT TAX- INPUT TAX
OUTPUT TAX……………………………………..42,857.14
INPUT TAX…………………………………………………..32,142.85
VAT PAYABLE……………………………………………….10,714.29

OR IF THE ANNUAL SALES IS P3MILLION AND BELOW UNDER ITIMED DEDUCTION, OPT CAN BE USED OF
3 PERCENT

BUSINESS OPT –OTHER PERCENTAGE TAX 3MILLION AND BELOW UNDER ITEMIZED
DEDUCTION/QUARTERLY PAYMENT

FIRST QUARTER 400,000 X 3 PERCENT= 12,000

SECOND QUARTER 500,000 X 3 PERCENT 15,000
THIRD QUARTER 1,000,000 X 3 PERCENT 30,000
FOURTH QUARTER 1,100,000 X 3 PERCENT - 33,000

TAXES AND LICENSES EXPENSE,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,12,000

CASH………………………………………………………………………………..12,000