Accouting Theory and Tax Rules

Questions: 1. A client informed you that they took an overseas trip for business purposes, on the basis of it being a legitimate expense they ask for the costs to be included as a deduction. When the client came to review and sign the tax return they showed you photographs of the family sightseeing in Europe. What would you do at this point? 2. One of the principles for the code of professional conduct for agents, states: You must take reasonable care in ascertaining a clients state of affairs, to the extent that ascertaining the state of those affairs is relevant to a statement you are making or an activity you are undertaking on behalf of the client. Describe what this means to you in terms of explaining the impact of taxation on the individual? 3. What part of the legislation provides details of how much income tax must be paid and what does it state? 4. Where would you find the current tax tables and descriptions of fees and charges? 5. In what journal would you record writing off a bad debt? 6. In which column (in the trail balance) would the bad debt be written? 7. List five legislation or compliance requirements that can affect transaction recording? 8. Explain what a general journal is; describe the process of entering a correcting entry then explain the general principles for reconciling balances outstanding and how would you enter somethings from the statement that decreases the bank balance? Answers: 1. After preparing the tax return, if the client comes and shows that the deduction for overseas trip made for business purpose he has taken and shows the family photographs of that trip. Then more inquiry should be done from him and on what basis he wants to treat the business trip as business expense (Tpbgovau, 2017). If no proof shown then the tax return must not be proceeded as the client is trying to manipulate the actual income. 2. Taking reasonable care means that the tax prepare must know what exactly the clients business is. Tax rules changes with business to business. For example, shares may be an investment for one person and trade for another. It will be treated differently. Therefore, there should be enough knowledge about the clients state of affairs to know the impact of taxation on it and can be explained to the taxpayer (Tpbgovau, 2017). 3. Section 4.10 of the Income Tax Assessment Act 1997 states about how much income tax is to be paid and it states that the tax is to be paid for each financial year of income earned on the basis of taxable income calculated for that tax year (Austliieduau, 2017). 4. Current tax table and the details about the fees and the charges can be found on the Australian Taxation Offices website under the heading Tax rates and Codes (ATOgovau, 2017). 5. Bad debts is written in General Journal as the other journals are specific to Purchases, Sales, Cash receipts, cash payments, Purchase returns, Sales return (Iedunotecom, 2015). 6. Bad debts are treated as expense and therefore are shown on the Debit side of the Trial Balance. 7. The five legislations or the compliance requirements which can affect the recording of the transaction in the as per Australia Tax laws are as follows: Income Tax Assessment Act, 1936, which deals with ordinary and statutory income earned by an individual Fringe Benefit Tax Assessment Act 1986, which deals with taxation of the additional benefits provided by an employer to its employee or its associates or by the associates of the employer. Sales tax act, which deals the taxation on the sale done by the business. Financial Management and Accountability Act, 1997 Superannuation Acts dealing with the amount provided into the superannuation of the employees. A New Tax System Goods and service Tax Act, 1999 on different goods at different rates. 8. General Journal is the journal used for recording the transactions which are not fitting the criteria of specific journals such as purchase, sales, cash, etc. A correcting entry is recorded in the books of accounts in two ways. One is to reverse the Previous journal entry made and to enter the correct entry. Second method is to make a Single entry which when combines with the original corrects the actual entry. General principle to reconcile balance outstanding is to check which balances are recorded in cash Book and in pass book. Next, is to check which balances are not reflected in the cash Book or the pass book and accordingly the same is to be added or subtracted from the Pass book or cash book respectively. Any event or transaction which decreases the balance of the bank is to be debited as the Payment is being made or any amount is decreasing the bank balance. References Tpbgovau. (2017). Tpbgovau. Retrieved 12 March, 2017, from https://www.tpb.gov.au/explanatory-paper-tpb-012010-code-professional-conduct Austliieduau. (2017). Austliieduau. Retrieved 12 March, 2017, from https://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s4.10.html Atogovau. (2017). Atogovau. Retrieved 12 March, 2017, from https://www.ato.gov.au/About-ATO/About-us/In-detail/Tenders-and-procurement/Contracting-in-the-ATO/Record-keeping-standard-for-ATO-contractors/?page=1 Iedunotecom. (2015). IEduNotecom. Retrieved 12 March, 2017, from https://iedunote.com/types-of-accounting-journal Accounting-simplifiedcom. (2017). Accounting-simplifiedcom. Retrieved 12 March, 2017, from https://accounting-simplified.com/accounting-for-bad-debts.html Atogovau. (2017). Atogovau. Retrieved 12 March, 2017, from https://www.ato.gov.au/Rates/?sorttype=SortByTopic Tpbgovau.(2017).Tpbgovau.Retrieved12March,2017,fromhttps://www.tpb.gov.au/sites/g/files/net1481/f/code_of_professional_conduct_aeu_reasonable_care_to_ascertain_a_clients_state_of_affairs.pdf?v=1469170810