Accounting Treatment Of Deficit In Business Operation

First, the accounting treatment methods and existing problems of the current operating losses in China. According to the relevant provisions of the current Provisional Regulations on enterprise income tax and the general financial rules of enterprises, the annual losses of enterprises can be made up by the pre tax profits of the next year. The profit of the next year is not enough to make up for the losses. It can be used to make up the profit before the profit in five years, and the deficit that has not been made up for five years is made up after tax profits.

In addition, the general rules of corporate finance also stipulates that surplus earnings extracted by enterprises can also be used to make up for losses.

According to the current accounting system, in addition to surplus earnings, it should be used as an accounting entry: surplus surplus; loan: profit distribution surplus surplus compensation (or surplus surplus pfer). When the company makes use of the annual profit (whether pre tax profit or after tax profit) to make up for the loss, it does not need to make separate accounting entries. The profit from the profit of the year will be pferred to the "profit distribution - undistributed profit" subject, which will naturally compensate for the previous year's losses.

The difference between pre tax compensation and post tax compensation is that the former carries forward the total amount before tax, while the latter carries the net profit after tax.

The existing problems of accounting treatment methods in China's current losses are: (1) failure to implement the principle of separation between financial accounting and tax accounting. In accordance with international accounting practices and the current accounting idea of income tax in China, financial accounting and tax accounting should be separated.

From the perspective of accounting, income tax expenses should be treated as a charge in accounting. It is usually calculated according to the pre tax profit and income tax rate.

According to accrual basis and matching principle, the pre tax profit should be calculated.

In the year of deficit making, if a company achieves profit, it should reasonably calculate the income.

It also reveals the net profit after deducting the income tax expense in the current profit and loss statement, so as to truly reflect the business results of the enterprise.

Of course, enterprises do not have to pay income tax to the tax authorities during the five years of the state's pre tax profit.

In accordance with current losses, the method of accounting treatment is not used to make up for the five years of pre tax profits. The current income statement reflects only the total amount of pre tax profits but not the net profit. This is obviously not in line with the overall mentality of China's income tax accounting reform, and also violates the accrual basis and matching principle, so that it can not correctly reveal the business results of enterprises.

(two) our current provisions on compensation deficiency fail to grasp the essence of loss making and lack of operability.

The "annual loss" in the current regulation 1. refers to the book loss or the tax loss.

From the point of view of financial accounting, we should make up for the loss.

However, from the perspective of tax law, the annual loss should be compensated by the pre tax profit in the next five years. That is to say, the annual loss of the enterprise should be deducted from the taxable income within five years. Therefore, the "annual loss" should naturally refer to the tax loss. As the financial accounting system, the general financial rules of enterprises do not specify whether the annual loss refers to the book loss or the tax loss, which is easy to cause confusion in accounting practice.

The unbalance profit of the 2. surplus before the deficit year, that is, the credit balance of the "profit distribution - undistributed profit" account can be used to make up the deficit.

According to the theory, the undistributed profit before the loss occurs is the constituent part of the owner's equity of the enterprise, and this part of the owner's equity has neither been allocated to investors nor specified any other purpose, so it should be logical to make up for the loss.

From the current regulations, the annual loss can only be compensated by the annual profit (before tax or after tax).

It seems that only in this way can enterprises benefit from the reduction of income tax. If the undistributed profit of the previous year's surplus is compensated, this part has already made up for the loss and can not offset the income tax.

The current system does not conform to the principle of separation between financial accounting and tax accounting. It is a mixture of accounting losses and tax deduction, and fails to grasp the essence of loss making up.

The debit balance of the 3. "profit distribution undistributed profit" account can reflect the annual loss to be made up.

According to the current system, the losses occurred in a year are directly borrowed: profit distribution - undistributed profit; loan: annual profit, so the profit distribution - the debit balance of the undistributed profit account can reflect the loss occurring in a certain year.

In fact, before the year of loss, the account of "profit distribution - undistributed profit" may have a credit balance. After the loss of the current year, the profit distribution undistributed profit account may still be a credit balance, even if the debit balance is offset by the original credit balance.

How should we control the surplus surplus of 4.?

The current "general financial provisions of enterprises" stipulates that surplus reserves can be used to make up for losses, and surplus surplus is also a project of owners' equity. It is entirely possible to supplement losses, but the question is, under what circumstances can surplus reserves be compensated? How much surplus surplus can be utilized to compensate for losses?

There is no explanation in the general rules of enterprise finance, which fully shows that the provisions of the current accounting system are imperfect, resulting in no practical handling.

Two, learn from international practices, improve the way to make up for losses in China. (1) accounting treatment for the year when losses occurred: Book losses of 1. years to the end of the year.

The loss incurred by an enterprise is manifested in the debit balance of the current profit account. At the end of the year, it should be pferred to the borrower of the subsidiary account for profit distribution to be made up for losses. The profit distribution is to be made up for the loss. The loan is: the profit of this year is added to the "profit distribution - the deficit to be made up" subsidiary ledger to clearly reflect the losses that should be compensated in the current year.

At the same time, the annotations in the accounting statements indicate the number of tax losses this year as a basis for calculating the tax deduction later.

In the year of the 2. loss, the undistributed profit of the previous year's balance can be used first to compensate for the loss.

Accounting entries: Borrowing: profit distribution - to be made up for losses.

If it is enough to cover losses and remain, profits can be allocated to investors in those years.

In the 3. year of the year of loss, if the undistributed profit of the previous year's surplus is not enough to cover losses, the surplus surplus mentioned in the previous year may also be used to make up the deficit.

To borrow entries: surplus surplus - arbitrary surplus reserves, statutory surplus reserves; loan: profit distribution - to be made up for losses.

If the surplus is saved after the loss is made up, the profit can also be distributed to investors.

The surplus of surplus surplus is larger than that of surplus earnings. The surplus surplus should normally be more than 25% of the registered capital after making up the deficit, and the profit distribution should be adopted by the general meeting of shareholders and comply with the relevant regulations of the State concerning dividend distribution.

4. if the loss is huge and fails to compensate for the above procedure, it can be used to supplement the deficit in the following year.

According to the income tax law of the PRC, the annual loss incurred by enterprises can be deducted from the tax revenue after five years, and the corresponding income tax shall be deducted. The amount of taxable income shall be deducted, and the tax loss shall be calculated within five years after the loss in the year is five years.

For example, the tax loss of 19 * 1 is 1 million 200 thousand yuan, if the taxable income of each 19 years from 2 to 19 to 6 years is 200 thousand yuan, and the income tax rate is 33%, it can be deducted from the five year income tax of 20 x x x 33%=33 million yuan, and the deduction is calculated on the basis of the year of the year of deduction. If the tax income of the year is set at RMB, the income tax shall be deducted and reduced by 33%=39.6 million yuan, calculated on the basis of the tax loss.

The loss in the year of loss is the benefit of income tax.

Because the deficit year generally can not predict whether there will be enough taxable profits in the next five years. According to the international accounting practice, according to the prudence principle, the income tax benefits after operating losses are usually not recognized.

After two years' losses, the company will make up for the losses incurred in the past year. After 1 years to 5 years after the loss, the profits and losses in the pre tax profit period stipulated by the tax law can be reduced to the corresponding income tax payable in the pre tax profit period of the loss year. If the enterprise has realized its profits, the income tax expenses should be calculated according to the accrual basis and matching principle. The enterprise should pay the national income tax due to the losses incurred in the previous year, which can be regarded as an income of the enterprise. It should be treated as an increase in the retained earnings of the enterprise: (1) borrow: income tax; loan: profit distribution, the undistributed profit, the profit is distributed in. Xie

If there is a difference between the accounting profit and the taxable profit in the current year, it is not necessary to apply the tax payable method or the tax impact accounting method according to the current income tax accounting regulations.

Borrow: profit this year; loan: income tax.

Borrowing: profit this year; loan: profit distribution - undistributed profit (net profit here); borrow: profit distribution - undistributed profit; loan: to make up for the loss.

After 2.5 years of pre tax profits and losses, the income tax should be calculated.

After tax profits make up for losses.

Borrow: income tax; loan: tax payable - income tax payable.

Borrow: profit this year; loan: income tax.

Borrow: profit this year; loan: profit distribution - undistributed profit; loan: profit distribution - undistributed profit.

Borrowing: profit distribution - undistributed profit; loan: profit distribution - to be made up for losses.

The debit balance of the account of "profit distribution - to be made up" accounts for the loss that has not been recovered. The account should have no balance after all the annual losses are made up.

What we should pay attention to here is that before the loss has not been made up, enterprises should not make a surplus of earnings or distribute profits to investors.

Even if there is a loss in a year, if the enterprise has enough undistributed profit or surplus surplus deficit, it can still allocate profits to investors.

In accordance with the above ideas, we should make corresponding changes in the accounting statements such as the balance sheet, the profit and loss account and the profit distribution table.