Answer To: Assignment - Part AYou are required to read the Facts below and answer the 5 questions. Each...
Preeta answered on Sep 16 2021
1
2
TITLE OF PAPER IN CAPS 7
Australian Tax
Name of Student
Institution Affiliation
Course
Code
Introduction
The provided facts for the task is that the main company is Cassilk. It is a private company and it was established in 2011. The firm mainly deals with fashion garments. They sell the garments to retailers and the public. So the paper will handle the tax law related aspects of Cassill. For example, the firm has an in house finance arrangement known as CassilkSelect Club. People can pay through periodic instalments. Furthermore, the task provides various situations that need suggestions on tax returns of Cassill.
So the paper provides discussions and suggestions about how the Cassilk can manage their tax returns and what implementations they can apply to handle their tax better.
1.
The cash approach is the possible accounting scheme usable for the Classilk company and other types of businesses or small enterprises. This is very much important for businesses doing mainly cash purchases, For example, department stores. In comparison, cash-oriented financing is easier and costs lower than the accrual method. It is originally very cost-effective for sole partnership and proprietorships businesses. The prepayment of spending may influence tax preparation in the present year or by the delay in receipt of revenue until the next year. Profit profits shall not be charged until the cash is provided. However, cash financing does not adequately represent the actual state of the assets, liabilities, sales, or expenditures of the company (Woodruff, 2018).
On the other hand, the accrual system reports income as the payment is made and documents the expense until the expense is paid, and the invoice is received. The accrual finance system is suitable for GAAP. Stakeholders will feel more assured that the submits of the financial statements of that firm. It adequately represents the results and economic health of the company. The reliable analysis compares income with spending to offer a more reliable view of the financial situation and results of the company. However, accrual accounting does not correctly reflect the cash flow of a business. Businesses will make good profits, but they also do not have cash in their bank accounts. Companies must file a special cash balance statement with other accounting statements to give an image of reserves of cash and liquidity.
The choice of accounting system to use varies on the nature of the enterprise, the amount of revenue, and whether or not the company carries inventory. The use of accounting techniques determines the sums accounted for and when annual sales and expenditures are accounted for (Aitken & Cameron, 2010). It does not alter the fact of whether or not a corporation is currently making a profit.
So, Cassilk needs to make their tax returns through cash. Because cash basis since financing services are provided and the transfer title and possession only after final payment.
2.
There Should be no tax consequences and the progress of taxation should commence as it should. Because if any customer defaults or fails to make all the agreed payments then the company should simply refund the partial amount that was paid by the defaulted customer and deduct it from the income of the company. Furthermore, the deduct should only happen if the payments were already updated in their income.
3.
The sales to be shown as and when made. If the customer does not pay the full amount, then the firm needs to show a sales return. Furthermore, The net income of the taxpayer includes the selling value of an item of the capital fund not provided in the normal course of the business of the taxpaying people. Any money currently earned by the taxpayer, in this case, is not counted in the taxable revenue. The seller of the stock is often known to have purchased the store for its fair value to meet the point of equilibrium. Thus, if Cassilk ceases keeping an item as a trade stock, but continues to keep the item, the sort shall be considered to have sold it for its expense and to recover it for the same price automatically. This clause may extend if the taxpayer takes stock of his personal use.
Yes, the bonus receivable and the granted credit of 215,000 dollars is assessable income. But it would be available in the next year of the year in which the bonus was received.
4.
First of all, the Assessable income of a taxpayer according to the Income Tax Valuation Act shall include the value to the taxpayer of all wages, wages, allowances,...