EPARTMENT OF ACCOUNTANCY

HOLY ANGEL UNIVERSITY

EDNEL TANHUECO DATU, CPA, MBA

Accountancy Program Coordinator
ATTENDANCE
SCHEMES,
ACCOUNTING
PERIODS,
ACCOUNTING
METHODS, AND
REPORTING
ACCOUNTIN
SHORT ACCOUNTING
G PERIOD Is the length of time over
which income is measured and
reported
-less than 12 months
PERIOD
1. Newly Commenced Business- the accounting period
covers the date of the start of the business until the
REGULAR designated year end of the business
ACCOUNTING PERIOD
-12 months in length 2. Dissolution of Business- accounting period covers the
A. Calendar start of the current year to the date of dissolution of
the business
B. Fiscal 3. Changes of Accounting Period by Corporate
Taxpayers- accounting period covers the start of the
-Deadline: 15th day of the fourth month following the previous accounting period upto designated year-end
close of the taxable year of the taxpayer of the new accounting period
4. Death of the Taxpayer- accounting period covers the
Calendar year must be used when: start of the calendar year until the death of the
- Taxpayers annual accounting period is other than a taxpayer
fiscal year 5. Termination of the accounting period of the
- Taxpayer has no annual accounting period taxpayer by the Commissioner of Internal Revenue-
- Taxpayer does not keep books accounting period covers the start of the current year
- Taxpayer is an individual until the date of termination of the accounting period
ACCOUNTIN
G METHODS -Accounting techniques
used to measure income Financial accounting concept of accrual basis and
cash basis are similar to their tax counterparts,
except only for the following tax rules:
GENERAL METHOD 1. ADVANCED INCOME IS TAXABLE
A. Accrual Basis- income is UPON RECEIPT
recognized when earned
regardless of when 2. PREPAID EXPENSE IS NON-
received. Expenses is DEDUCTIBLE
- recognized when incurred
regardless of when paid 3. SPECIAL TAX ACCOUNTING
REQUIREMENT MUST BE
B. Cash Basis income is
recognized when received FOLLOWED
and expense is recognized
when paid
ACCOUNTIN
G METHODS A. Initial Payment- total payments by the
buyer, in cash or property, in the
taxable year the sale was made
INSTALLMENT
-gross income is recognized and
METHOD
reported in proportion to the B. Selling Price- entire amount for which
collection from the installment the buyer is obligated to the seller
sales
Installment method is available to the following C. Contract Price- amount receivable in
taxpayers:
a. Dealers of personal property on the sale of
cash or other property from the buyer.
properties they regularly sell It is usually the selling price in the
b. Dealers of Real Properties, only if their initial absence of an agreement whereby the
payment does not exceed 25% of the selling price debtor assumes indebtedness on the
c. Casual Sale of non-dealers in property, real or
personal, when their selling price exceeds P1000 property
and their initial payment does not exceed 25% of
the selling price
1. A sold his ring, a capital asset, on February 14, 2020. The ring was acquired at a cost of
P60,000. The terms of payment:
2. Down payment, February 14, 2020 P25,000
3. Installment payment, February 14, 2021 25,000
4. Installment payment, February 14, 2022 50,000
5. Installment payment, February 14, 2023 20,000
6. Total P120,000
7. The taxable gain to be reported by A in 2020 is
1. A sold his ring, a capital asset, on February 14, 2020. The ring was acquired at a cost of
P60,000. The terms of payment:
2. Down payment, February 14, 2020 P25,000
3. Installment payment, February 14, 2021 25,000
4. Installment payment, February 14, 2022 50,000
5. Mortgage assumed by the buyer 20,000
6. Total P120,000
7. The taxable gain to be reported by A in 2020 is
1. A sold his ring, a capital asset, on February 14, 2020. The ring was acquired at a cost of
P60,000. The terms of payment:
2. Down payment, February 14, 2020 P15,000
3. Installment payment, February 14, 2021 15,000
4. Installment payment, February 14, 2022 30,000
5. Mortgage assumed by the buyer 70,000
6. Total P130,000
7. The taxable gain to be reported by A in 2020 is
ACCOUNTIN PERCENTAGE OF
G METHODS COMPLETION METHOD
FOR CONSTRUCTION
CONTRACTS
DEFERRED PAYMENT -the estimated gross income from
-a variant of the accrual basis and is
METHOD
used in reporting income when a non-
construction is reported based on the
percentage of completion of construction
interest bearing note is received as project
consideration in a sale. Under the
deferred payment method, the gross There are several methods of estimating
income is computed based on present project completion in practice, but the
value of a note receivable from the output method based on engineering
contract. The discount on the note is survey is prescribed by NIRC
amortized as interest income over the
installment term.
1. On December 1, 2019, a real estate dealer sold a residential land for 6M
(cost is 3.6M) receiving 2M as down payment and a promissory note for
the 4M balance payable at P400,000 a month beginning January 1, 2020.
The promissory note has fair market value equal to 75% of its face value, if
the income is to be reported under the deferred payment method, the
income in 2019 is
1.Construction:
Contract Price: 10,000,000

Percentage of Completion
2019- 30%
2020- 70%
2021- 100%

Expenses
2019- 1,400,000
2020- 2,200,000
2021- 1,100,000
 2019 2020 2021

Contract Price

Multiply by: %tage of

completion
Construction Revenue

Less: Construction
revenue in prior year
Construction revenue
this year
Less: Expense during
the year
Construction Gross
Income
ACCOUNTIN
G METHODS
CROP YEAR BASIS
INCOME FROM
LEASEHOLD -under the crop year basis, farming income is
-leasehold improvements are tangible
IMPROVEMENT
improvements made by the lessee to the property of
recognized as the difference between the proceeds
of harvest and expenses of the particular crop
the lessor. Improvements will benefit the lessor harvested. The expenses of each crop are
when their useful life extends beyond the lease accumulated and deducted upon the harvest of the
term. This benefit is referred to as income from crop
leasehold improvement.

OUTRIGHT METHOD

SPREAD-OUT
METHOD
EASEHOLD IMPROVEMENT
CROP YEAR BASIS
 MODE MANUAL FILING
SYSTEM
OF E-BIR
FILING FORMS
ELECTRONIC
INCOM FILING &
PAYMENT
E TAX SYSTEM (EFPS)

RETUR
 PENALTIES FOR LATE FILING OR
PAYMENT OF TAX
SURCHARGE
A. 25% OF THE BASIC TAX FOR FAILURE TO FILE OR PAY DEFICIENCY TAX
ON TIME
*the B. 50% FOR
non-filing WILLFUL
is considered NEGLECT
“willful neglect” if TO FILE
the BIR AND PAY
discovered TAXES first. If the taxpayer filed a
the non-filing
return before the receipt of such notice, the same is considered simple neglect subject to the 25% surcharge

INTEREST
DOUBLE OF THE LEGAL INTEREST RATE FOR LOANS OR FORBEARANCE
OF ANY MONEY IN THE ABSENCE OF ANY EXPRESS STIPULATION (12%)

COMPROMISE PENALTY
COMPROMISE PENALTY IS AN AMOUNT PAID IN LIEU OF CRIMINAL
PROSECUTION OVER A TAX VIOLATION
The income tax return for the calendar year 2018 was due for filing on april
15, 2019, but the taxpayer voluntarily filed his tax return without notice
from the BIR, only on july 15, 2019. The tax due per return amounts to
P100,000. The total amount due on july 15, 2019 (excluding compromise
penalty) is

if the income tax return is filed on time but through an internal revenue
officer other than with whom the return is required to be filed. The total
amount due is
The taxpayer did not file his income tax return for the calendar year 2018.
He was notified by the BIR of his failure to file the tax return, for which
reason he filed his tax return and paid the tax only after said notice on
October 15, 2020. The tax due per return is P100,000. The amount due is
Taxpayer filed on time his income tax return for calendar 2018 and paid P100,000 on
April 15, 2019. Upon pre-audit of his return, it was disclosed that he erroneously
computed the tax due. The correct amount of tax due is P 120,000. The taxpayer is
assessed for deficiency income tax in a letter of demand and assessment notice issued
on June 15, 2020 calling for payment on or before July 15, 2020. The amount still due
on July 15, 2020 is
 TAX ITEMS OF GROSS
INCOME

SCHEME TAXABLE TO

S
ANY ONE OF

FINAL INCOME CAPITAL GAINS REGULAR INCOME

TAXATION TAXATION TAXATION

MUTUALLY EXCLUSIVE
COVERAGE
 INCOME TAXATION SCHEMES

FINAL INCOME TAXATION- is characterized by final taxes wherein full

taxes are withheld by the income payor at source. The recipient income
taxpayer receives the income net of taxes. The payor is the one required by
law to remit the tax to the Government. Applicable only on certain passive
income listed by the law.

CAPITAL GAINS TAXATION- is imposed on the gain realized on the

sale, exchange and other dispositions of certain capital assets

REGULAR INCOME TAXATION-is the general rule in income taxation

and covers all other income.
REFERENC
ES:
• Income Taxation 2019 edition by Rex Banggawan
• CPA Reviewer in Taxation 2018 edition by Enrico D.
Tabag
• Philippine Income Tax 2019 Edition by Christopher P.
Llamado and Jack De Vera
• Reviewer in Taxation by Asser S. Tamayo
• CPAR
• RESA