Cash accounting for income and expenses: features and examples
There are a large number of tools that allow you to get an idea of the current state of affairs of any organization, if there are initial data. One of them is the cash method. What is he like? What specificity is there when using it? All this can be found in the article.
Initially, let us define what the cash method of accounting for income and expenses is. From January 1, 2002, taxation of organizations can be carried out in two ways. The first is the accrual method. This is a basic tool for most stakeholders. We will not consider it. The second option is a cash method. It is less popular. Why so?
The hitch is that organizations (except for banks) can determine the date of occurrence of incomes or expenses only in cases where revenues for four quarters excluding VAT and sales tax did not exceed 1 million rubles for each of the periods.What does this lead to? And the fact that the cash method of accounting for income and expenses allows the accountant to work with them only at the time of the actual movement of money, when the payment is made, the funds come to the cashier or to the account. Therefore, the organization should carefully monitor the balance.
Speaking in a simple way, this approach is when incomes and expenses are considered on the day of raising funds to the account or their spending. Individual entrepreneurs and companies of all forms of ownership, whose quarterly income does not exceed the value of one million rubles, can work in this way. There is no clear requirement in the law that this applies to each month. The main thing is that such an average value should be obtained after summing up the annual calculation. Although there is its own "preferential" category, which can not claim to use the cash method of income accounting.
- Credit / consumer cooperatives.
- Banks and organizations engaged in the microfinance sector.
- Firms whose registration was carried out on the territory of other states.
- Part of the organizations possessing licenses for subsoil use.
- Enterprises that operate under a trust management agreement.
Legal entities and individual entrepreneurs who have chosen the cash method of recording expenses and incomes are obliged to fix this provision in the accounting policy for the entire future tax period. In this case, I would like to note that the use of such tools is entirely voluntary.
The use of the cash method is not an obligation of the taxable subject. You can use it either at the time of registration, or from the beginning of a new calendar year. In this case, the organization will have to control the size of its profits and comply with certain restrictions in the contracts that are concluded. Of course, an increase in income is a pleasant and desirable consequence, but this will entail a change in the form of work of the organization.
Consider an example
There is a limited liability company "Kalina". It wants to change its work from the first quarter of 2018 and start counting income and expenses on a cash basis. To do this, calculatewhether the revenue of LLC Kalina corresponds to the legal limit. The data is as follows:
- Q1 2017 - 0.6 million p.
- 2nd quarter 2017 - 0.8 million p.
- 3rd quarter 2017 - 1 million p.
- IV quarter 2017 - 1.3 million p.
We summarize the figures, and excluding VAT, we have 3.7 million rubles. The quarterly value is 925 thousand. And this simple example shows that the limit is not exceeded, therefore the limited liability company Kalina has the right to use the cash method.
When the cash method of recognizing expenses and incomes is chosen, all responsible employees of the enterprise should not forget that the law provides for the reflection of all movements of funds. How to work with it? The most important legislative requirement is that all revenues that an organization receives should be taken into account only on the date they are received. And no matter what exactly happened. Funds were received for services or goods, or as a result of the transfer of property and even netting — all of this should be reflected in the relevant documentation.
Description of expenses
In the practical use of this approach, we should not forget that the reflection of spending should be carried out only afterhow they actually went to this or that operation. In this seemingly simple matter, there are a number of subtleties. Take, for example, wages, interest on credit funds or material costs. These expenses are accounted for using the cash method as soon as they are incurred. An enterprise can reflect the price of raw materials and materials not only immediately after purchase, but also after being written off into production.
Let's look at a small example. When tax accounting, LLC "Three trees" uses the cash method. On June 14, 2017, this structure purchased materials to start the production cycle. The total amount of the purchase was at the level of 118 thousand rubles, of which 18 tons is VAT. On the same day, a one-time and full payment was made, and on June 17, materials worth 60 thousand rubles without VAT were transferred to the production workshop.
And here the question arises how to reflect this situation on income tax. In fact, everything is simple. Initially, the entire volume of materials was paid. The day when they were written off part should be taken into account, and the announced figure of 60 thousand rubles should be indicated in the expenses. It is from this point of view that the income tax should be considered.At first glance, the cash method may seem rather complicated, but it is worthwhile to sit and figure out what it is, and no problems will arise.
Loss of rights to work under this scheme
In certain circumstances, a legal entity or an individual entrepreneur may be deprived of the opportunity to draw up its business on a cash basis. Therefore, regardless of the desire of the subject, he will have to be. The very same legal entity or individual entrepreneur is obliged to switch to the accrual method. But this will have to be done not immediately, but with the onset of a new calendar tax period. So, restrictions can occur in such cases.
- When concluding a simple partnership agreement or transferring property to trust management.
- If the amount of income that was received from the transactions and operations, exceeded the limit established by law.
To avoid consequences, it is necessary to monitor whether there is a right to work under this scheme. After all, if there are no reasons for this, the organization may receive a penalty from the regulatory authorities for violating the procedure for maintaining records.
Income from equity participation in other organizations
It often happens that a beneficiary in a structure is a legal entity. And if we assume that it uses the cash method? How to display all changes and movements of money supply in this case? And many in one aspect have a hitch, namely: when to make out incomes? For many, the answer is simple: on the date when the profit notice was received. But in fact, income should be processed at the time when the actual flow of money to the bank account or to the cash desk of the organization occurred.
If the benefit is acquired in the form of property, then it is necessary to be guided by the date of signing the act of acceptance / transmission. One more thing should also be taken into account: if the source of income is a foreign organization, the amount charged is determined by the taxpayer, based on the amount of dividends received, as well as the tax rate of 15%. To avoid additional losses, international treaties should be taken into account.
The most unpleasant option for entrepreneurs is to get under double taxation. If the Russian organization pays dividends, then all payments in this case are regulated by the second paragraph of article 275 of the Tax Code of the Russian Federation.In this case, the partner has the task to calculate and withhold the tax on income. There is an underwater rock. When receiving funds from Russian economic entities, they are not considered as non-operating income. Indeed, in this case, you will have to pay income tax twice, initially to the source of money, and then to the taxpayer himself.
So we looked at what is the cash method. But only in general terms. There are still a large number of different specific points that need to be studied according to regulatory documentation. As an example, finally, you can consider working with foreign currency. If an organization receives income due to a positive or negative exchange rate difference, which was formed as a result of selling or buying money, then the date of transfer of ownership of these material values is indicated.
When can a similar situation arise? It takes place if the selling rate of foreign currency exceeds the rate set by the Bank of Russia. In general, the options for specific cases are vast.Cash method - a reliable and easy way to take into account the income of the organization, which is worth paying attention to.