Key Concepts Illuminating the Financial World of Businesses
Accounting is the process of recording, reporting, and analyzing financial records of businesses. These are key concepts used to understand this complex process and shed light on the financial world of businesses. In this article, we aim to explain accounting terms and provide guidance to business owners, managers, and accounting professionals.
Accounting terms (AT) are fundamental concepts used to understand the financial activities of businesses. Examples of (AT) include income statement, balance sheet, cash flow statement, and other financial reports. These terms play a crucial role in assessing the performance of businesses, understanding their financial health, and formulating future strategies. Business owners and managers must understand accounting terms and interpret them accurately.
(AT) encompass a wide range of concepts. For instance, basic financial terms such as assets, liabilities, and equity define the financial position of a business. Concepts like revenue, expenses, profit, and loss measure a company’s performance. Recording methods and standards used in the accounting process are also significant terms. For example, the double-entry system, which records transactions on both sides, and the widely used International Financial Reporting Standards (IFRS) are important terms in financial reporting.
(AT) are also used to conduct financial analysis of businesses. Financial ratios such as liquidity ratios, profitability ratios, and activity ratios are essential tools for evaluating a company’s performance. Additionally, terms related to cost accounting are used to calculate production costs and assess cost efficiency. Concepts like variable costs, fixed costs, and marginal costs are fundamental to cost accounting.
(AT) are also important for tax planning and compliance. Tax-related terms help businesses understand their tax obligations and take advantage of tax benefits. For example, terms like depreciation, capital gains, and business expenses are commonly encountered in tax planning and compliance processes.
(AT) are key concepts that illuminate the financial world of businesses. Understanding these terms and applying them accurately is vital for business owners, managers, and accounting professionals to maintain accurate financial records, report them correctly, and analyze them effectively. Given the breadth of accounting terms, seeking consulting services and assistance from accounting experts is always recommended.
This article aims to help business owners, managers, and accounting professionals understand and correctly utilize accounting terms. As (AT) cover a broad range of topics, seeking consultancy and support from accounting experts is advised.
- Value Added Tax Return: The value-added tax (VAT) is a type of tax that is paid by the buyer and collected by you as the seller when you sell a product or service. For example, let’s say you prepare a commission invoice for 1200 TL and send it to the buyer. The buyer will already include 200 TL of VAT in this invoice, which you will report in the Value Added Tax Return for that month, and if you have no other deductible VAT, you will directly pay this amount to the government.
- Provisional Tax Declaration: Basically, it is a declaration showing the profit and loss situation. It is declared 3 times in a year, it is declared in 3-month periods. For example, the deadline for the declaration and payment of advance tax for January, February and March is May 17. Recently, the provisional tax for the 4th quarter was abolished by the Ministry of Finance. If we proceed with the example given above, 1000 TL, that is, the figure excluding VAT, constitutes our tax base. Over this figure, if we have a limited liability company, we will need to calculate our tax after subtracting all our expenses at the current rate of 25%. For example, let’s assume that our company has 100 TL rent expense, 50 TL electricity expense and 50 TL water expense against our 1000 TL income. When we subtract these expenses from income, we will have a net taxable income of 800 TL and we will have to declare and pay 200 TL, which is 25% of 800 TL, in the provisional tax declaration. The provisional tax rate is 15% for income taxpayers, commonly known as sole proprietorships. These companies pay a difference on top of the 15% tax they paid during the year, after determining which tax bracket they fall into, according to the tax brackets ranging from 15% to 40% in March of the following year, according to the income they earn at the end of the year. This is not the case for corporate taxpayers, such as limited liability companies and joint stock companies. They deduct the tax paid during the period in April of the following year and do not pay any extra tax since there is no additional tax bracket. On this occasion, we have actually explained the corporate tax return and income tax return to you in a general outline
- Withholding Tax Return: In our country, there is a practice of withholding tax at source, which can be explained. For example, suppose the owner of the office you rent does not have tax liability and cannot issue an invoice to you. When you pay 1000 TL in rent, you will report 250 TL, which is 25%, in the withholding tax return and pay the tax on behalf of the landlord. Those who are officially employed report this return monthly, while companies that do not have officially employed workers can report it every three months. This source withholding tax practice applies to payments made to freelance professionals such as tax advisors, lawyers, and engineers, and many other fields.
In general, these are the types of returns that an average taxpayer may encounter.
