ACCT 3350 Lecture Notes - Lecture 18: Capital Cost Allowance, Income Tax, Income Statement
28 Nov 2017
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Accounting for income taxes: accounting vs taxable income. Corporations are the only form of business subject to tax in canada. Typically applied at a flat rate against corporations income. Pre-tax net income of an entity calculated by application of cica handbook recommendations to all transactions. The amount of income subject to taxation as specified in the income tax act. Majority of revenues, expenses related identically for both tax and accounting purposes. Dividends are exempt from tax, paid after-tax earnings, so they won"t be double taxed. Revenues or expenses which are included in accounting income but exempt from tax and thus are excluded from income tax calculation. Not good when expenses are exempt from tax > not deductible for tax purposes. Intercompany dividend income: except from tax tax on other companies income is taxed when submitted tax returns , dividends are paid out of after-tax earnings, avoid being double taxed examples: 50% of capital gains (tax free portion)
