Describe the process of computing a corporation's taxable income assuming the corporation must use GAAP to determine its book income.© BrainMass Inc. brainmass.com June 22, 2018, 7:17 am ad1c9bdddf
That is a very thoughtful statement and although the resulting taxable income should be the same in all cases, the size of a business may change the process.
For a small business:
The company may hire an independent accountant who prepares unaudited financial statements for clients together with the federal and state corporate return. The financial statements are generally for the bank and the owners. The use of GAAP may be mandatory (companies with inventory, for example) or may be preferred by the users of the statements.
Whether GAAP is used or not, the corporate tax return has one (huge) set of rules that may not match the financial statements. The accountant hired to prepare the financial statements will change hats to prepare the tax return. We assume competency in tax preparation which means the accountant ...
The 542 word cited solution presents methods for a small business and a large business. Also listed are examples of differences in GAAP and Tax.