Tax savings every year

2010 income tax filing has ended a month ago. I can still remember the pressure of handling the audit and discussing with the auditors some tax exposure we may have if the financial statements are not presented in a proper way.

As much as possible we try to avoid being examined by BIR. But right now, I think BIR has this project of running after tax evaders so they really do tax audit on most of the companies, especially those who have been declaring losses for three consecutive years.

But how do we make sure we have tax savings avoid to be penalized? First you have to familiarize yourself with BIR regulations and circulars. This would ensure that we are complying 100% with their regulations, if not, a penalty is always being charged to non-compliant taxpayers.

Second, make sure that all expenses are supported with legitimate and valid receipts. Un-receipted expenses will be subject to being disallowed by BIR.

Monitor some expenses because, some expenses have cap or limit. For example,
representation expenses is allowed up to 1% only of the gross revenues. If you go beyond that, the excess will be disallowed expenses, thus making your taxes higher.

The key to have tax savings is to get familiar with these BIR issued regulations. Once your familiar with it, you will be able to work your way towards bigger savings for your company.

Accounting 101

Who says that for you to understand Accounting, you need to be a math wizard? Uh, well, that was me. That's what I used to believe.

Humility aside, I am quite good with numbers--algebra, algorithms, cosine, etc.-- that is why I wanted to take up Engineering in college in the first place. But, no! my Mom said. There are more job opportunities if you take up Accounting, she said.

And so here I am, an accountant in a financing company, doing the paper works, books, documentation, reports, taxation, payroll and everything under the sun. So where was the math? The only mathematical operation you need to master is addition and subtraction. Translate that to accounting and it would be: Debit or Credit.

Accounting, mind you, is not all math. In fact the best skill that you could probably have here is the reading comprehension and analytical skills. In school, for you to solve the problem, you have to understand very well what it is asking for and then analyze whether you will deduct or subtract. If you have poor comprehension, then that's where the problem sets in.

From first year to fourth year, the only equation that we were asked to master is Assets = Liabilities + Equity. Solve test problems and you will still work your way around that equation for you to answer it correctly.

At work that equation is all you need to prepare your financial statements. That equation is the core of Accounting and a must to be mastered. Probably, I will discuss and elaborate about it further in another post.

I don't know why they seem to make accounting look so hard, when if fact we do accounting in our everyday life. From the time that we were students and receiving allowances from our parents, we are already performing accounting. Your weekly allowance less your weekly expenses equals savings, err-- in that case, excess money for gimmick time.

Well, being an accounting student is hard because of all the hard-to-pass subjects. Then, after graduation, you still have to study for the board exam which is more and extra difficult than when you were in the undergrad. But all of this are just training ground to prepare you for the real accounting world.

You would be surprise once you are already working that accounting is fun. Full of pressure but fun. It is not about calculus or geometry. It is not about algebra or algorithms. It only requires business math. Master the credits and debits, master the equation and you will survive accounting 101.