Tax Accounting Method Examples

You can specify a tax accounting method for each entity. An example of each tax accounting method follows.

Gross Liability Method Example

This section describes the Gross Liability tax accounting method that you can select at the entity level.

Income withholding tax generates both a receivable and a payable amount. A receivable is created as the gross amount of the income less the amount of the reclaim, and a separate receivable is created for the reclaim amount, if any. A payable is also created for the unrecoverable tax amount (tax expense). Eagle Accounting relieves both the payable and receivable against cash on the Pay Date. The General ledger posting and calculations for Gross Liability follow.

Gross Liability Method: Daily Accruals
	GL Account Number	GL Account	Calculation
Dr	1007000500	Income Receivable	(income) - (income * reclaim rate)
Dr	1007001500	Reclaim Tax Receivable	(income * reclaim rate)
Cr	5004001500	Income Tax Expense	(income * (withholding rate - reclaim rate))
Cr	2004000600	Withholding Tax Payable	(income * (withholding rate - reclaim rate))
Cr	4001000100	Income	(shares * rate) / (par * coupon /days)

Gross Liability Method: Coupon Pay Date
	GL Account Number	GL Account	Calculation
Dr	1010000100	Cash	(income - (income * withholding rate)
Dr	2004000600	Withholding Tax Payable	(income * (withholding rate - reclaim rate))
Cr	1007000500	Income Receivable	(income - (income * reclaim rate)

Gross Liability Method: Reclaim Pay Date
	GL Account Number	GL Account	Calculation
Dr	1010000100	Cash	(income * reclaim rate)
Cr	1007001500	Reclaim Tax Receivable	(income * reclaim rate)

Gross Liability Method: Avoir Fiscal on Ex-Date
	GL Account Number	GL Account	Calculation
Dr	1007000200	Dividend Receivable	(shares * dividend rate) + (shares dividend Rate * Avoir fiscal reclaim rate * Avoir fiscal w/ h rate)
Dr	1007001800	Avoir Fiscal Receivable	(shares * dividend rate * Avoir fiscal reclaim Rate) - (shares * dividend rate * Avoir fiscal reclaim * Avoir fiscal tax withholding rate) (Income * w/hold rate)
Cr	2002000900	Dividend W/H Tax Payable	(Avoir fiscal * income)
Cr	4001000600	Dividend Income	(shares * rate)
Dr	5002000900	W/H Tax - Dividends	(income * w/hold rate)

Gross Liability Method: Avoir Fiscal on Pay Date
	GL Account Number	GL Account
Dr	1001000100	Cash
Cr	1007000200	Dividends Receivable
Dr	2002000900	Dividend W/H Tax Payable

Gross Liability Method: Avoir Fiscal Reclaim Pay Date
	GL Account Number	GL Account
Dr	1001000100	Cash
Cr	1007001800	Avoir Fiscal Receivable

Net Method Example

This section describes the Net tax accounting method that you can select at the entity level.

A receivable is created as the net income amount (gross income less withholding tax), and a separate receivable is created for the reclaim amount, if any. The payable for the tax expense is not created. General ledger posting and calculations for the Net Method follow.

Net Method: Daily Accruals
	GL Account Number	GL Account	Calculation
Dr	1007000500	Income Receivable	(income) - (income * withholding rate)
Dr	1007001500	Reclaim Tax Receivable	(income * reclaim rate)
Cr	5004001500	Income Tax Expense	(income * (withholding rate - reclaim rate))
Cr	4001000100	Income	(shares * rate) / (par * coupon / days)

Net Method: Coupon Pay Date
	GL Account Number	GL Account	Calculation
Dr	1010000100	Cash	(income - (income * withholding rate)
Cr	1007000500	Income Receivable	(income - (income * withholding rate)

Net Method: Reclaim Pay Date
	GL Account Number	GL Account	Calculation
Dr	1010000100	Cash	(income * reclaim rate)
Cr	1007001500	Reclaim Tax Receivable	(income * reclaim rate)

Net Method: Avoir Fiscal Posting on Ex-Date
	GL Account Number	GL Account	Calculation
Dr	1007000200	Dividend Receivable	(income) - (income * w/h rate))
Dr	5002000900	Dividend Tax Expense	(shares * dividend rate * w/hold rate) + (shares * dividend rate * Avoir fiscal reclaim * Avoir Fiscal tax withholding rate)
Dr	1007001800	Avoir Fiscal Receivable	(shares * dividend rate * Avoir fiscal reclaim rate) - (Shares * dividend rate * Avoir fiscal reclaim rate * Avoir fiscal tax withholding rate)
Cr	4001000600	Dividend Income	(shares * dividend rate) + ((shares * Dividend Rate) * Avoir fiscal reclaim rate)

Net Method: Avoir Fiscal on Pay Date
	GL Account Number	GL Account
Dr	1001000100	Cash
Cr	1007000200	Dividends Receivable
Dr	2002000900	Dividend W/H Tax Payable

Net Method: Avoir Fiscal on Pay Date
	GL Account Number	GL Account
Dr	1001000100	Cash
Cr	1007001800	Avoir Fiscal Receivable

Gross Income Method Example

This section describes the Gross Income tax accounting method that you can select at the entity level.

No withholding tax is recognized on either dividend or coupon entitlements, regardless of how the tax tables are set up. General ledger posting and calculations for Gross Income appear in the following tables.

Gross Income Method: Daily Accruals
	GL Account Number	GL Account	Calculation
Dr	1007000500	Income Receivable	(shares * rate) / (par * coupon / days)
Cr	4001000100	Income	(shares * rate) / (par * coupon / days)

Gross Income Method: Coupon Pay Date
	GL Account Number	GL Account	Calculation
Dr	1010000100	Cash	(shares * rate) / (par * coupon / days)
Cr	1007000500	Income Receivable	(shares * rate) / (par * coupon / days)

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