1. If management decides to implement a reduction in workforce, what types of reports might they use to make the decision of where to cut? What issues might arise due to this reduction?
2. Management has told you that they want to reduce total costs of operations and SG&A by 10%. What types of reports would you look at to make these decisions?
3. Define the term “tax strategy." Name at least two common tax strategies.
4. What is the difference between book and tax accounting? Does taxable income always equal book income? Why or why not?
The type of report needed to implement a reduction in the workforce will consist of the need for the human resources, availability of the human resources and compensation report. When an employer implements a workforce through the process of layoffs, reduction in force, rightsizing, etc then it will lead to a global economic scenario that will lead to higher job losses and widespread unemployment will be noticed (Davies & Crawford, 2012). It will impact the staff members along with the department.
The selling, general and administrative expenses are projected on the income statement and the reduction in such expenses by 10% can be properly evaluated with the help of projected profit and loss statement and the sales budget. Moreover, the report on expenditure will sketch a clear idea in terms of decision making. The projected expenditure statement will indicate whether the business is operating effectively and will even provide a brief idea whether the business will be affected by the reduction or not. Such reports will aid in better decision making (Davies & Crawford, 2012). The SG&A expenses will be ascertained to evaluate whether the cash flow is managed in a smooth manner.
Tax strategy can be defined as the way of reducing the income tax amount that is owned by an individual or business by taking benefit of the different tax credit that is available. The two common tax strategies are increasing deduction and taking benefit of the tax credits (Choi & Meek, 2011).
Tax accounting deals with the method of accounting that is concerned with taxes instead of the financial statements. The Internal Revenue code governs tax accounting and tames the rules that companies, as well as individuals need to follow during the preparation of the return. On the other hand, book accounting deals with the financial records of the company like the journal and the ledger. It defines the financial memory of the company (Deegan, 2011).
There is a difference between taxable income and book income because the rules governing both these differ in their nature. Some differences appear to be permanent while other is temporary. Therefore, the governing rules lead to a difference between the two.
Choi, R.D. & Meek, G.K. (2011). International accounting. Pearson.
Davies, T. & Crawford, I. (2012). Financial accounting. Harlow, England: Pearson.
Deegan, C. M., (2011). In Financial accounting theory. North Ryde, N.S.W: McGraw-Hill
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