Tax accounting is the accounting methods that focus on taxes rather than the appearance of public financial statements. It is governed by the Internal Revenue Code which dictates the specific rules that companies and individuals must follow when preparing their tax returns. Tax principles often differ from Generally Accepted Accounting Principles. Balance sheet items can be accounted for differently when preparing financial statements and tax payable. For example, companies can prepare their financial statements implementing the first-in-first-out (FIFO) method to record their inventory for financial purposes, yet they can implement the last-in-first-out (LIFO) approach for tax purposes. The latter procedure reduces the current year's taxes payable.[source:http://www.investopedia.com]
Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University
