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PAS 12: Accounting vs. Tax Income

Pas 12 outlines the accounting treatment for differences between accounting income (accrual basis) and taxable income (cash basis) due to the Philippine Tax Law. It defines key terms such as accounting profit, taxable profit, and temporary differences, and distinguishes between permanent and temporary differences in income and expenses. The objective is to reconcile accounting profit with taxable profit, ensuring accurate tax reporting and compliance.

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Jennizhel Asis
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10 views3 pages

PAS 12: Accounting vs. Tax Income

Pas 12 outlines the accounting treatment for differences between accounting income (accrual basis) and taxable income (cash basis) due to the Philippine Tax Law. It defines key terms such as accounting profit, taxable profit, and temporary differences, and distinguishes between permanent and temporary differences in income and expenses. The objective is to reconcile accounting profit with taxable profit, ensuring accurate tax reporting and compliance.

Uploaded by

Jennizhel Asis
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Pas 12 Income Taxes

Objective:
How should we account for the difference in the accounting record?
That is the objective of Pas 12 because accounting income (Cash basis) and
Taxable income (Accrual basis) are Different.

Accruals
a. The accounting treatment to get income is accrual basis.
b. Results to accounting profit.

Cash Basis
a. Base on the Philippine Tax Law or Train Law.
b. Results to taxable income.
Definition of Terms:
The following terms are defined.
Accounting Profit This is the profit or loss for a period before deducting tax
expense.
Taxable Profit This is the profit/(Loss) for a period, determined in accordance
with the rules established by the taxation authorities, upon which
income taxes are payable. (recoverable)
Taxable Expense This is the aggregate amount included in the determination of
profit or loss for the period in respect of current tax and deferred
tax.
Current Tax The amount of income taxes payable (recoverable) in respect of
the taxable profit (tax loss) for the period.
Deferred Tax The amounts of income taxes payable in future period in respect
Liabilities of taxable temporary differences.
Deferred Tax Asset Amounts of income tax recoverable in the period in respect of (a)
deductible temporary differences, (b) the carryforward of unused
tax losses, and (c) the carryforward of the unused tax credits.
Temporary Are the differences between the carrying amount of an asset or a
Difference liability in the statement of financial position and its tax base.
Taxable temporary Are the temporary differences that will result in taxable amounts
differences in determining taxable profit (tax loss) of future periods when the
carrying amount of the asset or a liability is recovered or settled.
Deductible These are temporary differences that will result in amounts that
Temporary are deductible in determining taxable profit (tax loss) of future
differences periods when the carrying amount of the assert or liability is
recovered or settled.
The difference between accounting profit and Taxable
income;
a. Permanent difference
b. Temporary difference

a. Permanent Difference Non-Taxable Revenue (NTR)


 Items of revenue and I - Accounting Prospective Revenue

expense which are - Sa TAX perspective hindi Revenue.
included in either
accounting income or Note: NTR should NEVER be included into
taxable income but will others. E.q. The NTR sa accounting perspective
lang wala sa TAX perspective.
NEVER I be included in
others.
 Pertains to nontaxable
revenue (accruals) and
nondeductible expenses. Non-Deductible Expense (NDE)
 Does not give rise to
- Expense are deducted in revenue to
deferred tax asset and
arrive at NI so sa accounting persoective
deferred tax liability
NDE is deducted.
because they have no
- TAX Perspective not deducted.
future tax consequences.

*One of the objective of Pas 12;

Is to reconcile the accounting profit and taxable profit.

What will happen is from accounting profit to taxable profit.

Illustration:

Accounting Profit
Pre-Tax profit XXX
NTR (XXX)
Accounting Profit XXX
subject for tax

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