Accrued Expense

Accrued Expense

As noted in Accounts Payables, tax deductibles for corporate income are recognized on an accrual basis not cash basis. Therefore, when you are recognizing in a cash basis, you need to accrue at the end of the year or simply make accrual adjustments when calculating taxable income for filing tax returns.

For below expenses, even if you have not made payments, you are able to claim as tax deductible based on accruals.

1. Rent
2. Interests
3. Leasing expenses

Depending on your business characteristics, there may be other items you may claim as tax deductibles, so consult with your tax accountant at the time of closing. Besides recognizing tax deductibles as accruals, you are able to recognize deductibles on a cash basis under certain conditions. This is when you make payments for expenses extending for more than a month, be sure to check what is best for the company with the accounting office.