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Taxes in P&L statement?

I'm a officer/founder of a small C corp. Another person is responsible for the bookkeeping (who is not an accountant, but an engineer) with the help of a CPA. Every quarter the "bookkeeper" generates a YTD P&L statement from QuickBooks (I guess it can do this automatically). This is probably not relevent, but he generates CASH and ACCURAL version for us for reference, although we file our taxes using CASH.

My specific question is should taxes (e.g. federal) paid (and TAXES due for the accrual case) be included as a Expense on the P&L? He says yes, but I think they should not be. (I don't have any direct contact with the CPA to ask him without making waves).

In our case, tax management is one our primary concerns (distributing salary/commision payments over the year to minimize profits, corporate taxes, and late estimated tax payment penalties). When taxes are included in the P&L you have to remember to add the taxes back into the net income to to estimate the taxable profits.

Does the standard definition of a P&L include taxes or not? - Thanks

Reply to
nearly_blind
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Of course it does. Taxes are an expense of the business. Just because they aren't deductible in calculating taxable income doesn't mean they don't reduce income for accounting purposes. Otherwise you would get a very unrealistic picture of your business profit!

An accrual method corporation expenses state and federal income taxes accrued on a book basis. If there are timing differences between book and tax treatment of certain items (e.g., depreciation), the deduction is divided between current and deferred tax liabilities. Debit tax expense, credit current and deferred liabilities. When the tax is paid, the liability account is debited.

Katie in San Diego

Reply to
Katie

State and local tax paid does reduce federal taxable income and thus federal taxes, and foreign taxes paid also reduce federal tax.

When companies reporting their earnings, like 100M or 50 cents a share, is that before all taxes, before federal taxes, or after all taxes?

Reply to
removeps-groups

For public corporations, as a single headline number it is after accrued taxes. The without-taxes number is usually also available.

Reply to
DF2
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Reply to
Katie

Here's how one large company does it

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Reply to
Arthur Kamlet

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