Finding out taxable income at the end of the year

[Adrien Monteleone]

Michael brings up a great point.

Here’s another traditional accounting term to search for: “allowance for doubtful accounts.”

It usually resides as a sub-account of A/R. It is a contra-account which means it normally has a credit balance. (assets normally have a debit balance)

You use the account by balancing it against Bad Debt Expense.

Here’s a decent write-up on the subject: https://www.accountingtools.com/articles/2017/5/15/the-allowance-for-doubtful-accounts


Regards,
Adrien

> On Mar 8, 2018, at 7:17 AM, Mike or Penny Novack <stepbystepfarm at dialup4less.com> wrote:
> 
> On 3/8/2018 4:06 AM, Maf. King wrote
>>>  I cannot look in income:sales to
>>> determine how much taxable income I report, because it would include how
>>> much I'm owed also.
>>> 
>>> 
>>> As such, what is the best way to find out how much taxable income I make
>>> per year to report on my taxes?
>>> 
>> Hi,
>> 
>> This is the difference between "accruals" accounting and "cash" accounting.
>> 
>> Basically, GC's invoice module uses accruals - the tax is calculated based on
>> when you create the invoice, not when you are paid.
> This is partially a case of "not a gnucash question"
> 
> Maf. King gave you an answer that partially addresses the "what if my books are kept accrual but I report taxes on the cash basis?"
> 
> But there is another part of this. As anybody in business knows, SOME of what you are owed never gets paid. In other words, there needs to be a periodic adjustment for "bad debt" and/or the loss when outstanding debt is sold to a collector for less than the face amount. Before asking us "how do I do this using gnucash?" you need to look up "how this is handled in any accounting system". Once you understand THAT (what the transactions would be) you might easily see HOW to enter in gnucash or you ask us at that point.
> 
> I will just give hints (ideas of what terms you might search for) "bad debt" (generally an expense)   "journal transactions" (a term for this sort of adjustment)
> 
> Michael D Novack
> 
> 
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