Question

What must you consider when providing information to clients?(in the context of accounting environment when consulting with clients regarding their company taxation etc) Discuss in 120–150 words.(Please type up your answer)

Answer 1

If the client is an individual, his/her total taxable income and wealth should be considered. If the client is a firm or company, financial statements of such should be considered.

Financial statements are income statement, balance sheet, statement of retained earnings, and cash flows statement. Current year’s tax depends on income statement – how much tax to be paid, how much would be tax credit, etc. Balance sheet gives idea about how much the tax liability is till date; wealth generation is also reflected through balance sheet. Statement of retained earnings should be considered because of understanding accumulated profit and dividends. Cash flow statement indicates whether the company is liable for any capital gain tax or not – suppose sale of property through cash must be reflected in cash flow statement.