2.5.2 Complete the following texts using the suitable words or phrases from the box.

A	payable	E	deferred
B	expenses payable	F	levied
C	Balance Sheet	G	accounting
D	calculation	H	tax liability

When it comes to income tax ____(1)____ it is important to understand some of the terms like ____(2)____, Income Statement, Illustrations because on the basis of these we calculate income tax.

• Balance sheet: The tax which gets ____(3)____ is calculated using the Balance Sheet, deferred tax asset is recognized after each period for the decrease in future income taxes ____(4)____ in the Balance Sheet.

• Income Statement: income tax ____(5)____ at each period may increase or decrease depending upon the changes taking place in deferred ____(6)____ and the deferred tax asset.

• Illustration: It is more over a calculation of income on which tax is ____(7)____. This involves lots of mathematical ____(8)____ and formulae.

2.5.3 Complete the text. Replace the Russian words and phrases by the English equivalents.

Financial налоговый учет is the recording, интерпретация and reporting of финансовых операций. Every business has вести записи of financial tax accounting, which is наиболее эффективно done под строгим контролем of Tax Accounting manager. A manager is one who has specialization in управление налогами and with his знания и опыт he does it at his best, while doing so the manager also заставляет помощника работать должным образом guiding and mentoring to весь персонал.

2.5.4 Text for discussion.

a. Look up the dictionary or Unit 1 Glossary for the meaning and pronunciation of the following words and word-combinations and use them to discuss the problems outlined in the text.

Cash method; accrual method; qualification; beneficial method; inventory; spendable capital.

b. Briefly scan the text and outline the list of major points.

c. Read the text more carefully and comment on the following items:

- the individual features of both methods of tax accounting;

- the advantages and disadvantages of both types.

2 Types of Tax Accounting

As of the 2008 fiscal year, there are only a few different ways to compile tax accounting information, but 2 main methods. The acceptable ways of submitting information are the cash method, accrual method, or a combination of both. Depending on qualification, these different methods can be chosen by a company according to timing of transactions such as credits and debits. If qualified for either method, the company will look at the advantages and disadvantages of each method and choose the most beneficial method. There are two parameters that a business must not qualify for to have the ability to choose their tax accounting method. A business must use the accrual method if the sales are over $5 million or there is inventory stockpiled that will either be sold to the public or used to make products sold to the public.

The accrual method, or accrual basis, of tax accounting records sales and purchases as the order is processed. In this method, physically receiving or paying money is not the time of recording. When a sale is made or a job is completed the credits or debits are recorded, regardless of the money actually changing hands or not. This method is simpler when large contracts are signed, but the payment plan may last several years. One disadvantage would be that even though the books show a large capital, the actual funds are not in the account.

The cash method, or cash basis, of tax accounting is simply recording transactions as the money is exchanged. This method is more accurate and gives a better feel for how much spendable capital a business has to use. Depending on the set-up of the business procedure, the cash method takes a little more discipline in book keeping. Unlike the accrual method that records the transaction as the order is processed in the office, in cash accounting the payment must be recorded directly after payment is taken. The cash method can also leave a window for fraud or theft, whereas accrual accounting has checks and balances to make sure the correct amount of payment is applied for each order.