Chapter 3 - Business Income and Expenses for Tax Purposes Flashcards
An incorporated company may select a fiscal period ending when?
at any date in the year
An incorporated company must file its tax return within
six months following the end of its fiscal year.
the fiscal year of a sole proprietorship or partnership is the calendar year unless all the partners are
individuals
Income from a business or professional practice must be reported using
the accrual basis of accounting
Under the accrual basis of accounting, one would
recognize income once it is
earned
The value of work in progress at the end of the fiscal period is subject to income tax. This value corresponds to either of two amounts:
- The amount of the invoice for the services provided
- The expenses incurred for the services provided
The cost of goods sold is determined by the value of __ and __
- inventory at the beginning and end of the fiscal period
- the cost of purchases over the year
There are two allowable inventory valuation methods:
- Valuating all inventory at its fair market value
- Valuating each item, or each group of items, at the lower of cost or fair market value
NON-DEDUCTIBLE EXPENSES (6)
FINES AND PENALTIES
LIFE INSURANCE PREMIUMS
CHARITABLE DONATIONS
POLITICAL CONTRIBUTIONS
NON-DEDUCTIBLE RESERVES
BAD DEBT RESERVE
following expenses relating to the use of an automobile may be deducted: (8)
- Licence and registration fees
- Insurance
- Fuel and oil costs
- Maintenance and repairs
- Parking costs
- Interest
- Depreciation
- Leasing fees
If the business takes out a loan to finance the purchase of an automobile, interest charges are deductible up to an average of ___ per month, until the loan has been repaid.
$300
Can you deduct costs relating to the use of an automobile to travel from home to the place of business?
no
When can you deduct the costs incurred for travel from home?
if the home is a place of business
When are repair costs due to accidents deductible?
if the automobile was being used to carry on a professional or commercial activity at the time of the accident.
Expenses relating to the business use of a workspace in the home may be deducted under two conditions:
- The workspace is the principal place of business of the commercial activity or professional practice.
- It is used exclusively to earn business or professional income and to meet clients, customers, or patients on a regular and ongoing basis