HANDOUT

ACCOUNTING
Media- banking terminology that refers to the basis of the transaction as in posting media.
BRS- an accounting tool used by the businesses and individuals to know the true balance of cash in the bank account

Two types of Discounts

Trade Discount
- reductions in the list price to entice customers to buy in bulk.
- is not recorded in books of accounts.
- gives you the invoice price
Cash Discount
- Computed as reductions in the invoice price so that customers will pay earlier than the due date.
- These are recorded in the books of accounts as sales discounts or purchase discounts.

TAX AND TAXATION

Tax- an imposition by the government upon person, property, or right exercised within its jurisdiction.
Taxation- refers to the power of the state by which the sovereign raises revenue to defray the necessary expenses of the
government.
Rationale of Taxation

PRINCIPLES OF TAXATION
Fiscal adequacy- means that sources of revenue are sufficient to meet the government expenditures
Equality or Theoretical Justice- requires that the tax imposed must me proportionate to taxpayer’s ability to pay.
Administrative feasibility- demands that the law must be capable of convenient, just and effective administration

PURPOSES OF TAXATION
Primary purposes/fiscal purpose
- to take care of the basic needs of the citizens of the areas of health, education, safety, and protection
- to provide infrastructure for the conduct of commerce and industry.
Ex. Construction of schools, roads, bridges, public markets and hospitals.
Secondary purposes
- Regulatory – conveys that taxation is employed as a device od regulation or control by means of which certain
effects or conditions envisioned by the government may be achieved.
- Compensatory – signifies imposition or levying of taxes to attain some social and economic ends, irrespective of
whether the revenue is actually raised or not.

GENERAL PROCESS OF TAXATION

Tax Identification Number (TIN)- assigned to the business entity upon registration with BIR.
BIR Form 1903- accomplished by the business, which shall be supported by (a) securities and exchange commission
(SEC) and (b) a mayor’s business permit
Certificate of registration- must be renewed annually before 31 January
BIR Form 1902- fills up by an individual taxpayer deriving income from compensation and supported by his/her birth
certificate certified by (NSO) or National Statistics Office and declared dependents.
e- Services- taxpayer’s can-do electronic filing.

INCOME AND BUSINESS TAXATION

Income taxation- the levying of taxes on income of the tax payer based on his/her residence, citizenship, or place where
the income was earned.
Taxation – the imposition of taxes on an individual or business entity based on the place where the business is being
operated.

PRINCIPLES OF INCOME TAXATION

Income – the metric of the taxpayer’s capability to pay tax.
Gross income- is any flow of wealth to the taxpayer that increases net worth from any source legal or illegal.
Compensation income- all remuneration received under an employment.
Business income- arises from a regular conduct of any commercial activity resulting in regular sales of goods or services
by an individual or a business organization.
Income from profession- income from the sale of services, the income earned due to the skill you possess.
Income from properties- include rental income and forms of passive income which earned with very little amount of
involvement by the taxpayer.
Gain on sale dispositions of real property in the Philippines
Gain on sale dispositions of domestic directly to buyer
Gains from the other capital assets

TYPES OF INCOME TAX PAYERS

Resident citizen- refers to a Filipino citizen residing in the Philippines.
Non- resident citizen- a citizen of the Philippines who satisfactorily proves that he/she resides abroad intentionally
during the taxable year.
Resident alien- pertains to an individual who is residing in the Philippines but is not a citizen.
Non- resident aliens- are of two types; nonresident alien engaged in trade or business in the Philippines and
nonresident alien not engaged in trade or business (NRA- NETB)
Special aliens- refer to aliens, including qualified Filipinos, employed by a regional or area headquarters or regional
operating headquarters of multinational companies, offshore banking units and petroleum services contractors or
subcontractors.
Domestic corporation- is one that organized in accordance with Philippine laws.
Situs of income- is another principle of income taxation. It determines whether or not an income is taxable in the
Philippines.

PROCESS OF INCOME TAXATION

Final income taxation- a system whereby the person making the income payments is responsible to withhold the tax.
Passive income- are enumerated in inclusions in gross income. Different investments made by the individual
Interest income- from foreign currency deposits under the foreign system or expanded foreign currency deposit system
(EFCDS) under the local banking system.
Dividends- refer to distribution of a corporation’s profits to its shareholders.
Creditable withholding tax- is imposed on most items of regular income and is withheld at source by customers or
clients, but is not the final tax.
Regular income tax- is computed based on taxable income.
PRINCIPLES OF BUSINESS TAXATION
Excise tax- is imposed only on manufacturers or importers. Excise taxes are of two kinds: a) specific tax and b) ad
valorem tax. These two are differentiated in terms of tax basis. Specific tax is based on weight or volume capacity or the
physical unit of measurement. On the other hand, ad valorem tax is based on the selling price or other specified value of
the article.
VAT- is a tax on consumption, levied on the sale, barter, exchange or lease of goods or properties and services in the
Philippines and the importation of goods
into the Philippines.

DISTINCTION BETWEEN INDIVIDUAL AND BUSINESS TAXATION

Personal exemptions- refer to the theoretical personal, Irving, and family expenses of an individual allowed to be
deducted from gross income. The types of personal exemptions are basic personal additional personal exemption, and
premium for health and hospitalization insurance.
Basic personal exemptions- are 50 000.00 each for (a) single, including separated spouse without a dependent, widow,
or widower, (b) head of the family, and (c) married.

THREE INTENENT POWER OF THE GOVERNMENT

1. Eminent domain- the power of the government to take private property, upon payment of just compensation to
be used for public purposes.
2. Police power- the power f government to make laws that will promote public health, morals, safety, and welfare
of the people.
3. Taxation – pwer of government to collect taxes that will be used to finance different projects needed by the
people.

INCOME TAXATION
Two biggest classification of income taxpayers
a. Individuals
b. Corporation
RATE TO COMPUTE
Basic over Not over Tax Plus Of excess over

10,000 5%
10,000 30,000 5,000 10% 10,000
30,000 70,000 2,000 15% 30,000
70,000 140,000 8,500 20% 70,000
140,000 250,000 22,500 25% 140,000
250,000 500,000 50,000 30% 250,000
500,000 125,000 32% 500,000

QUALIFICATIONS FOR DEPENDENT

A. Must be legitimate, illegitimate or legally adopted child of the tax payer
B. Must be chiefly dependent upon the taxpayer and still living with them
C. Must not be more than 21 years old, unmarried and not gainfully employed.
D. Though more than 21 years old

TYPES OF BANK DEPOSITS

1. DEMAND DEPOSIT- demand anytime
2. SAVINGS DEPOSIT- long process
3. TIME DEPOSITS- limited withdrawal
 Bank reconciliation
- A statement which brings into agreement, the cash balance per book and cash balance per bank
Book reconciliation items
1. Credit memos (CM)
- notes receivable collected by the bank in favor of the depositor
- process of bank loan
- matured time deposits transferred by the bank to the current account
2. Debit memos (DM)
- refers to the item not representing checks paid by the bank which are charged on debited by the bank to the
account of the depositor
- not yet recorded by the depositor as cash disbursement
- NSF or no sufficient fund checks, these are checks deposited but returned by the bank because of insufficient
fund
- technically defective checks, these are checks deposited but returned by the bank because of technical defect
-bank service charge
- reduction of loan
3. Errors
Bank reconciliation items
1. Outstanding check (OC)
2. Deposit in transit (DIT)
3. Errors
Purpose of BRS
- To monitor bank accounts/ bank transactions
Bank statement
- Monthly report of the bank of the depositor showing the cash balance per bank at the
TAXATION beginning BRS