How are taxes accounted for in the income statement?
May 28, 2024 | 50,00 EUR | answered by Jonas Kessler
Dear tax advisor,
I am currently in the process of preparing my profit and loss statement and have some questions regarding the consideration of taxes. I am unsure of how to properly include taxes in my profit and loss statement.
In the current situation, I run a small business and have made a profit in this fiscal year. Now, I want to include this profit in my profit and loss statement, but I am unsure of how to account for taxes. Should I deduct the taxes before declaring the profit, or how is this usually handled?
My concern is that I do not want my profit and loss statement to be incorrect or incomplete. I want to ensure that all relevant items are accurately recorded and that taxes are also properly accounted for.
Therefore, my question is: How are taxes accounted for in the profit and loss statement? Are there specific guidelines or regulations that I need to follow? Should I deduct taxes before or after declaring the profit? What are the implications of taxes on my declared profit?
I appreciate your help and assistance in addressing these questions.
Sincerely,
Wilhelm Lehmann
Dear Mr. Lehmann,
Thank you for your question regarding the consideration of taxes in your profit and loss statement. It is good that you are thinking about this, as a correct representation of taxes in your profit and loss statement is essential for the meaningfulness of your company's financial figures.
In general, there are different ways in which taxes can be accounted for in the profit and loss statement. Typically, taxes are either deducted before the profit is shown or added after the profit is shown. Both methods are permissible, but they have different effects on your reported profit.
If you deduct taxes before showing the profit, the profit is reduced by the tax amount. This means that your reported profit already takes into account the tax deduction and is therefore "tax-adjusted." This method is often used to provide a clearer overview of the company's actual profit.
If you add taxes after showing the profit, the reported profit is increased by the tax amount. This means that your profit is stated without taxes and the taxes are shown as a separate item in the profit and loss statement. This method is often chosen to ensure transparency and traceability of the tax position.
It is important to note that there is no fixed rule on which method you must use. You should choose the method that best suits your company and its structure. It may also be useful to consult with an experienced tax advisor to ensure that taxes are accounted for correctly and appropriately in your profit and loss statement.
In summary, the consideration of taxes in your profit and loss statement plays an important role and should be carefully considered. Choose the method that best fits your company and make sure that all relevant items are correctly recorded.
I hope this information helps you and answers your questions. If you need further assistance, I am happy to help.
Best regards,
Jonas Kessler
