Did you know, tax accounting is a science that you must learn before you get into business.
Even this knowledge is still important for those of you who are not a businessman but have obligations in terms of taxation.
Because basically the tax itself is deferred to every citizen who meets the taxpayer requirements.
So that you don’t take the wrong step, get confused, or experience unwanted things when dealing with taxation, it’s a good idea to study tax accounting.
Read Also : What is CRM? Definition, Benefits, Types and CRM Strategy Tips
From these root causes, you can read this article to find out more about what tax accounting is, its principles, classification and functions.
Definition of Tax Accounting
Tax is a mandatory component, which must be paid by certain parties or individuals who have fulfilled the requirements as personal taxpayers and corporate taxpayers.
To deal with tax cases, which have the purpose of paying tax collection, taxpayers must understand very well about taxation.
Because of that this branch of science emerged. Where tax accounting is the science that discusses the ins and outs of recording and calculating taxes.
In studying tax accounting, you are not only asked to record and calculate taxes.
Tax accounting is a science that allows you to process data or information to calculate the amount to be paid according to applicable regulations.
Here it can be concluded that accounting is present in the world of taxation. Why is it considered present? This was due to the fact that during the old taxation era the self-assessment system had not been implemented at that time.
However, due to work efficiency reasons, in the modern era of taxation, accounting is included in the world of taxation.
This is what makes you, as a personal and corporate taxpayer, must start studying tax accounting!
Tax itself has a mandatory nature and is enforced through applicable laws and regulations .
With the allocation of the use of taxes will be returned to the people in the form of government programs for people’s prosperity, facilities and also general advice.
The use of the tax itself will be distributed to important aspects of the country such as economic, social, cultural aspects, as well as community resources.
Read Also : 5 Examples of Employee Attendance Reports that are Often Used by HR
Basic Principles of Tax Accounting
As a first step, you can start by understanding the basic principles of tax accounting.
Where tax accounting is a science that is quite complicated. Even in a case even a tax accountant will take quite a long time.
Therefore to understand this tax accounting, you must start from the basics.
1. Unity
Through the self-assessment method, the state indirectly states that every company believes in its responsibility to the state.
In other words, this principle reinforces the opinion that the company is one of the country’s economic strengths.
Even though they don’t work together directly, every taxpayer is an economic entity that has one thing in common in economic unity.
2. Historical
The second principle covers more on financial recording according to actual events. You could say that taxation requires that the recording in the form of a tax return report be made in real (real).
This means that price increases and price reductions must be written in detail in reports related to tax collection.
Because accounting means an exact science, so every different number must be recorded to reduce the risk of miscalculation.
3. Full Disclosure
Then finally there is the principle of full disclosure, where this principle is a reinforcement of the previous principle.
Accountants are required to provide recording details for each activity. However, in addition to detailed reports, it must also present clear information.
In this principle, accountants are allowed to add additional notes to related attachments to corroborate the notes they make.
Read Also : Financial Management: Definition, Principles, Functions and Tips
Tax Accounting Classification
Tax accounting is an exact science, which has different calculations for each classification it has.
To study tax accounting, it’s a good idea to know the classification of the tax itself.
Where taxes are divided into two classifications, such as the two classifications that will be explained below.
1. Direct Tax
The first classification is deferred tax on taxpayers, on the basis of calculating the amount of income and also the total assets owned in the calculated period.
For direct taxes, tax payments cannot be represented, and must be made by the individual.
Tax payments can also be made without coming directly to the tax office. But now tax payments can be made online via the tax application .
The amount of tax will be adjusted to the tax regulations in the laws that regulate it.
Examples of this tax are types of income tax, regional tax, land and building tax
2. Indirect Taxes
Then for the second classification there is an indirect tax, where this tax is calculated on a buying and selling transaction.
For this classification, tax can be charged to other people, or more precisely, this tax can be deferred to customers who buy a product.
Concrete examples of this classification are the types of stamp duty, value added tax and sales tax on luxury goods.
Read Also : What are SOPs? Definition, Benefits and Examples
Then What Is The Function Of Tax Accounting For Taxpayers?
Studying tax accounting is an obligation for every taxpayer. You will get many functions by studying tax accounting.
As some of the tax accounting functions that will be discussed below:
1. Strategic Planning Function
The first function of tax accounting is to make strategic planning in future tax affairs.
Because taxes are a routine expense that you are required to pay, you need careful planning for tax allocation.
Therefore, previous tax data can be a reference for improving business or personal finance in the future.
With this knowledge of tax accounting, you can determine the best strategy for taxation in the next period.
2. Data Analysis Function
With the provision of tax accounting knowledge, it will be easier for you to analyze data. From this analysis you will get the results of the tax costs that you have to spend.
This analysis process is an important factor, apart from that by analyzing yourself at least you will avoid fraud that can be committed by irresponsible persons.
That way you are not easily exposed to misuse of tax funds and tax matters will be easier.
3. Publication Function
The purpose of publication here is to provide financial reports to those who have direct contact with you.
For example, for a startup business, tax reports must be included in the expense report that you provide to investors.
Detailed and clear reports will show the level of professionalism of the company you are building.
4. Comparator Function
From archives or documentation of previous tax data, you can compare them to find out the development of your business.
Tax data archives can also be easily done through the features of the online tax application.
This function depends on the previous functions. Because precise calculations are needed to get real comparison results.
However, from this comparison you can also determine what business strategy you should adopt to close the gaps that occurred in the previous period.
Read Also : Factory Overhead: Definition, Function and How to Calculate
Example of Tax Accounting Calculation
Tax accounting calculations have several variables before calculating the amount of tax to be paid.
For example, to calculate the tax payable, you must know the amount of employee income tax (PPh), taxable income (PKP), and the number of taxpayers.
The following is the formula for calculating the tax payable, including:
Corporate Income Tax = 25% x PKP
Taxes payable = corporate income tax – income tax – article 23 income tax
For example, PT Jaya has a gross income of around 50 billion with PPh of around 2 billion, PPh Article 23 of 1 billion and expenses of 22 billion.
Based on the formula, the PKP from PT Jaya = 50 billion – 22 billion = 28 billion
So, PT Jaya’s tax payable is:
Corporate Income Tax = 25% x 28 billion = 7 billion
Taxes payable = 7 billion – 2 billion – 1 billion = 4 billion
The calculation example is only an overview. Calculating taxes manually is quite complicated to do for the tax accounting profession .