en
Procedures to be followed when replacing funds
Procedures to be followed when replacing funds
Company A provides services to Company B worth 40,000 manats. At the same time, Company A owes Company B 40,000 manats. The parties want to offset these claims. Can Company B account for the 40,000 manats (which it was supposed to pay for the service) as its expense?
The State Tax Service under the Ministry of Economy has stated that, apart from expenses that are not deductible from income, all expenses related to earning income, as well as mandatory payments prescribed by law, are deducted from income.
Additionally, a taxpayer is obligated to keep accurate and timely records of their income and expenses based on documented information, and to attribute their income and expenses to the appropriate reporting periods based on the accounting method applied.
Micro enterprises may choose to use either the cash method or the accrual method for accounting income and expenses, while small, medium, and large enterprises must use the accrual method.
A taxpayer using the accrual method must account for income and expenses based on the time when the right to receive income or the obligation to incur an expense arises, regardless of the actual time of income receipt or expense incurrence.
When using the accrual method, an expense is considered incurred at the time when all obligations under the contract or agreement are fulfilled by all parties involved, or when the relevant amounts are unconditionally paid.
If a taxpayer performs work or provides services under a contract, income is considered received at the time when the work or services specified in the contract are fully completed.
It is noted that when using the cash method, the time of income receipt is when the taxpayer receives cash funds, or when the funds are credited to the taxpayer’s bank account or to an account where they may have control, or when they have the right to receive the specified amount. When financial obligations are canceled or paid (in cases of mutual settlements and similar situations), the time of income receipt is considered to be the time when the obligation is canceled or paid.
For tax accounting purposes, when using the cash method, the time of expense incurrence, unless otherwise specified in this section, is the actual time of expense incurrence. When financial obligations to the taxpayer are canceled or paid (in cases of mutual settlements and similar situations), the time of expense incurrence is considered to be when the obligation is canceled or paid.
Additionally, it is noted that when using either the cash or accrual method, if debt obligations or rental payments cover multiple reporting periods, the amount of interest (rental fees) deductible from income and actually paid during the reporting year is equal to the amount of interest (rental fees) calculated for that year.
According to the query, the 40,000 manats is considered as income for Company A and an expense for Company B.
Company A provides services to Company B worth 40,000 manats. At the same time, Company A owes Company B 40,000 manats. The parties want to offset these claims. Can Company B account for the 40,000 manats (which it was supposed to pay for the service) as its expense?
The State Tax Service under the Ministry of Economy has stated that, apart from expenses that are not deductible from income, all expenses related to earning income, as well as mandatory payments prescribed by law, are deducted from income.
Additionally, a taxpayer is obligated to keep accurate and timely records of their income and expenses based on documented information, and to attribute their income and expenses to the appropriate reporting periods based on the accounting method applied.
Micro enterprises may choose to use either the cash method or the accrual method for accounting income and expenses, while small, medium, and large enterprises must use the accrual method.
A taxpayer using the accrual method must account for income and expenses based on the time when the right to receive income or the obligation to incur an expense arises, regardless of the actual time of income receipt or expense incurrence.
When using the accrual method, an expense is considered incurred at the time when all obligations under the contract or agreement are fulfilled by all parties involved, or when the relevant amounts are unconditionally paid.
If a taxpayer performs work or provides services under a contract, income is considered received at the time when the work or services specified in the contract are fully completed.
It is noted that when using the cash method, the time of income receipt is when the taxpayer receives cash funds, or when the funds are credited to the taxpayer’s bank account or to an account where they may have control, or when they have the right to receive the specified amount. When financial obligations are canceled or paid (in cases of mutual settlements and similar situations), the time of income receipt is considered to be the time when the obligation is canceled or paid.
For tax accounting purposes, when using the cash method, the time of expense incurrence, unless otherwise specified in this section, is the actual time of expense incurrence. When financial obligations to the taxpayer are canceled or paid (in cases of mutual settlements and similar situations), the time of expense incurrence is considered to be when the obligation is canceled or paid.
Additionally, it is noted that when using either the cash or accrual method, if debt obligations or rental payments cover multiple reporting periods, the amount of interest (rental fees) deductible from income and actually paid during the reporting year is equal to the amount of interest (rental fees) calculated for that year.
According to the query, the 40,000 manats is considered as income for Company A and an expense for Company B.