How do balance sheet and tax balance sheet differ?
August 6, 2022 | 40,00 EUR | answered by Laura Hohenwarter
Dear tax advisor,
My name is Jürgen Klett and I am the managing director of a medium-sized company. In my role, I am responsible for the finances and accounting. Lately, I have been focusing more on the topic of accounting and have a question that is weighing on my mind.
I have heard that there are differences between the commercial balance sheet and the tax balance sheet, but I do not fully understand what these differences are and what impact they may have on my company. Could you please explain to me what these two types of balance sheets are and how they differ from each other?
I am aware that the commercial balance sheet is prepared according to commercial law regulations and represents the financial situation of the company to creditors and investors. The tax balance sheet, on the other hand, is prepared for tax purposes and serves as the basis for calculating the taxes that my company must pay.
I am concerned that I may be making mistakes in preparing the balance sheets, which could lead to tax or financial disadvantages for my company. Therefore, it would be very helpful if you could explain the differences between the commercial balance sheet and the tax balance sheet and suggest possible solutions on how I can ensure that both balance sheets are prepared correctly and error-free.
Thank you in advance for your help and support.
Sincerely,
Jürgen Klett
Dear Jürgen Klett,
Thank you for your inquiry and interest in the topic of accounting. It is good that you are looking into the differences between financial statements and tax balance sheets, as these two types of balances actually serve different purposes and regulations.
The financial statement is prepared according to commercial law regulations and primarily serves to present the financial situation of a company to creditors, investors, and other external stakeholders. It aims to provide an objective picture of a company's economic situation and is therefore of high importance for the transparency and credibility of a company.
On the other hand, the tax balance sheet is prepared for tax purposes and serves as the basis for calculating the taxes a company must pay. Certain tax regulations and valuation requirements must be considered in the tax balance sheet, which may differ from commercial law regulations. This can result in different values for assets, liabilities, and profits being reported in the tax balance sheet compared to the financial statement.
An example of a difference between financial statements and tax balance sheets is the depreciation of fixed assets. While the financial statement often uses the straight-line depreciation method, the tax balance sheet may involve different depreciation methods that offer tax advantages.
Errors in preparing the balances can indeed lead to tax or financial disadvantages for your company. Therefore, it is important that you familiarize yourself with the respective regulations and rules for financial and tax accounting, or consult a professional tax advisor who can assist you in correctly preparing the balances.
To ensure that your balances are correctly and error-free, you should attend regular training sessions, stay informed about current changes in accounting rules, and consult an expert if in doubt. Understanding and correctly implementing the differences between financial statements and tax balance sheets is important in order to minimize potential risks for your company.
I hope this information helps you and wish you success in accurately preparing your balances.
Sincerely,
Laura Hohenwarter
