Tax Accounting: Types and Basics to Know
Posted on Mar 05, 2023 at 10:03 PM
Tax accounting is an inseparable part of the administration and management of businesses of different sizes. It must therefore be understood, or at least understood, the basic principles of this much-needed profession.
The definition of tax accounting addresses the various processes of studying and maintaining tax financial information within the company. This concept deals with tracking all the company's financial operations, ensuring timely payment of financial obligations, and many other specific functions.
Before learning about the basic rules and principles of tax accounting, let's explain the branches of this accounting.
What are the main sections of tax accounting?
All segments of society perform tax, including employees and companies, and even non-profit organisations and institutions pay tax differently. Tax accounting is divided into three cross-cutting areas:
- Staff Tax Accounting Branch:
The first primary type of tax accounting is in which individual employees are taxed according to each employee's annual income (salaries). These taxes may also include investment fees and personal business activities, i.e. they follow all individuals' economic sources of revenue.
- Corporate Tax Accounting Branch:
Corporate tax accounting is more complex than for individuals. Companies' financial systems should provide detailed information on the tax to be paid for the prior period, information on the current tax, and data on the taxes that the company may incur in the future.
Interest and rewards earned by companies can be counted among their tax liabilities. The use of a tax accountant to regulate taxes only is every day in large companies, given the importance of managing taxes economically and strategically.
- Non-Profit Organizations Tax Accounting Branch:
One of the most widespread branches of tax accounting, where a non-profit organisation is exempt from taxes in many countries of the world, but is required to provide disclosures on all funding providers (such as donations), how funds for such contributions are earned, ways of spending and applications in assisting, etc.
These disclosures are required to ensure that organisations do not contravene laws regarding funds and that they have successful financial management.
Before reaching the basics of the tax accounting concept, we will remind you of the tax accountant's main tasks.
What are the tax accountant's tasks?
The tax accountant has a large number of tasks, varying according to the scope and size of the companies, but the most common tasks can be counted among the companies, namely:
- Collect and verify financial data and information.
- Create the company budget, and provide reports of activities that increase the company's sources of income.
- Increase assets and reduce liabilities and costs as much as possible.
- Audit all financial transactions occurring in the company in several phases.
- Prepare lists of current and future taxes that the company should pay and confirm payment in time.
- Verify that no financial law has been violated in the company's state.
- Attend meetings that measure, predict, and evaluate future risk situations.
What are the basics and skills of tax accounting?
Handling numbers in easy form is the skill and main advantage to be enjoyed by all accountants. The skills and basics of tax accounting do not stand there. There are many of them, which most employers very much require. This is a list of the most prominent tax accounting bases:
- Mastering basic terms in tax accounting:
As a tax accountant, you must learn about the types of budgets and the basic terms in tax and tax accounting, as they represent the basic accounting structure. The following concepts represent what may be termed general accounting terms:
- Income statement.
- Balance sheet.
- Profit and Loss Statement (P&L).
- Statement of cash flows.
- A settlement with banks.
- Learn and master your listening skill:
Listening is one of the essential accounting skills when dealing with any tax. The tax accountant needs to listen to all employees within the company and listen to stakeholders and companies to collect information from them.
- Following transparency and impartiality regulations:
The tax accountant must certainly be transparent; that is, he must clearly define all the procedures he has done to determine the amounts of any tax and the total taxes within the company.
It should also be impartial, and neutrality can be defined here by not penalizing an employee or company using a specific tax type but by having the main and only objective of increasing revenue.
We must note that all tax records and documents must be kept to ensure they conform to financial laws and regulations.
- Learn the rules and principles of project budget management:
Most companies in the financial profession focus on the applicant being informed and familiar with the principles of project budget management, in addition to the fact that according to many international recruitment studies for 2022, the more experience in project budget management, the greater the likelihood of the recruitment process because it constitutes value added than other accountants.
Tax accountants should also increase the asset and reduce the deduction to the extent possible within the company's projects and applications, no matter how small.
- Proficiency in time management skills:
As more taxes emerge during the days of the year, the work and effort to cover all these taxes increase, so any tax accountant must have the skill to organize and manage time.
There are methods and tools designed to regulate time and increase productivity, perhaps most notably the tomato technique (Pomodor) and the Eisenhower Matrix, which greatly help to prioritize and reduce time lost in less essential responsibilities and businesses, thereby increasing productivity in tax accounting functions.
Finally, always make sure that starting a business of whatever size does not make you become an expert financial accountant, and remember that learning the tax accounting profession needs a lot of time and effort, but budgeting online training can professionalize the tax accounting profession and provide a considerable amount of time, effort and legal troubles.
