Parts of an account for gains and losses, part 3

Although some lines with an account of profits and losses, depending on estimates or predictions, then the line is a basic equation interest burden. In accounting for income taxes, an undertaking, but different accounting methods for a number of its expenditure than that used for calculation of taxable income. The hypothetical taxable income, if the accounting methods used used in the tax return is calculated. Since the income tax on the basis of this hypothetical taxable income fitured. This is from the income tax expense in the income statement reported. This amount is reconciled with the actual amount of income tax paid on the basis of the accounting methods used for tax purposes. A reconciliation of the two different income tax amounts than in a footnote to the profit and loss account.

The net result is that profit before interest and tax (EBIT) and can vary considerably depending on the accounting methods used to report sales of income and expenses. This is where profit smoothing can come into play to manipulate earnings. Gain equalization crosses the line of acceptable accounting methods to choose from the list of GAAP and implement these methods in a reasonable way, in the gray area of profit management with accounting manipulation.

It is for managers and entrepreneurs to be involved in decisions on the accounting methods used to measure the benefits and how these methods to actually be implemented. A Director may be required to answer questions about the financial statements of the company on many occasions. It is therefore crucial that the authorizing officer or Manager of an undertaking which is very well aware of how the company's financial statements are prepared. Accounting methods and how they are implemented varies from company to company. A commercial practices can be anywhere on a continuum to the left or right of Center of GAAP.

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