Pirets N., Panenko A., The problems of harmonization of business and tax accounting in the context of income and expenses

Abstract

All differences in definition and classification of income and expenses are described in detail and the conclusions are drawn according to Accounting Provisions (Standards) and the Tax Code of Ukraine. It has been proved that the accounting standards provide more detailed classification of expenses and income and give more economically oriented definitions of the terms under consideration. The moment of recognition (moment of realization) of income and expenses is defined, the divergences which influence the convergence of business and tax accounting are determined. It is explained how the financial results are reflected in the annual financial statements as this moment of divergence in accounting is also important and essential.  The primary documents in two accounting systems, which are used to recognize income and expenses, are studied.  One of the most significant moments of divergence is described, namely, the composition of income and expenses which are not included into financial results in business and tax accounting. It has been proved that therein lies the essential problem of harmonization of two accounting systems and this is also the moment of high importance as it concerns the increase of accountability of the business activities and the prevention of tax evasion. Taking into consideration the above, the problem of convergence of business and tax accounting is gaining public significance. The last comparison criterion is examined - it is the taxable income and the algorithm of its calculation. Having studied and described the main differences of income and expenses in business and tax accounting, the significant conclusions concerning the convergence of two accounting systems are drawn