[Tobecpa1]

Do I need to memorize schedule M-1 Reconciliation Book to Tax income as what items to add back to Book and what to subtract out? I couldn’t grab the concepts the M-1 reconciliation. I have a hard time identify which item is to added back , subtracted out, or no effect to book vs tax. Please share your knowledge.

For example: Bad debt expense – $5000 estimate amount and $1,500 were actually deemed uncollected, so the difference of $3,500 is to be added back to book?

[NYCaccountant]

The bad debt expense would result in a deferred tax asset. If you think about it, you'll be expensing 5,000 on your income statement, but only expensing 1,500 on your tax return. That means that your income tax expense per tax will be higher than income tax per book. This will result in a deferred asset which can be used when you actually write off receivables.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

The bad debt expense would result in a deferred tax asset. If you think about it, you'll be expensing 5,000 on your income statement, but only expensing 1,500 on your tax return. That means that your income tax expense per tax will be higher than income tax per book. This will result in a deferred asset which can be used when you actually write off receivables.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

Sorry, you'll add back the $3,500 to book income to get taxable income. You're going to pay taxes on $3,500 more of you income because the $3,500 is not deductible for tax purposes yet.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

Sorry, you'll add back the $3,500 to book income to get taxable income. You're going to pay taxes on $3,500 more of you income because the $3,500 is not deductible for tax purposes yet.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[Anonymous]

Other things to note regarding reconciliation of book income to taxable income or vice versa are organizational expenses, goodwill, charitable deductions. Wiley has good simulations involving this, and other corporate issues on reg; perhaps, check out the book much?

You're welcome,

Sincerely, Alexander Dernfel III

[Anonymous]

Other things to note regarding reconciliation of book income to taxable income or vice versa are organizational expenses, goodwill, charitable deductions. Wiley has good simulations involving this, and other corporate issues on reg; perhaps, check out the book much?

You're welcome,

Sincerely, Alexander Dernfel III

[Author]

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