Accountingequation
(1)Assets=Liabilities+Owners’Equity
Enterprisesmusthaveacertainnumberandtypesofassetsforproductionandbusinessactivities.Thesourceofinternalassetsofanenterprisecannotbedistinguishedfromtwochannels:
1.Itisprovidedbythecreditoroftheenterprise
2.Itisprovidedbytheowneroftheenterprise(includingtheproductionandoperationoftheenterprise).Theprofitobtainedintheprocessbelongstotheownerbuthasnotbeendistributed).
Itcanbeseenthatalltheassetsofanenterpriseshouldbelongtothecreditorsandownersoftheenterprise,andtheyhavetherighttoclaimtheassetsoftheenterprise.Thiskindofclaimiscalledequityinaccounting.Thepartthatbelongstothecreditoriscalledthecreditor'sequity,thatis,theliability;thepartthatbelongstotheowneriscalledtheowner'sequity.
(2)Income-Expenses=Profits
Theincomeearnedbyanenterpriseinacertainperiodoftimeisdeductedfromtheexpensesincurred,andthenitisshownasprofit.Sincetheenterpriseisestablishedbyinvestors(shareholders),theprofitsshouldbelongtotheinvestors.Therefore,theprofitismanifestedasanincreaseintheowner'sequity.Ifalossoccurs,itindicatesadecreaseintheowner'sequity.
1.Beforecheckout:Assets=Liabilities+Owners'Equity+Income-Expenses
Assets=Liabilities+Owners'Equity+Profits
2.AfterCheckingOut:Assets=Liabilities+Owners’Equity
TaxTreatment
FixedAssets
1.Fixedassetsareenterprisesthatproduceproducts,providelaborservices,leaseormanageoperationsThenon-monetaryassetsheldandusedformorethan12monthsincludehouses,buildings,machinery,machinery,meansoftransportation,andotherequipment,appliances,tools,etc.relatedtoproductionandbusinessactivities.
Whencalculatingthetaxableincome,thedepreciationoffixedassetscalculatedbytheenterpriseinaccordancewiththeregulationsisallowedtobededucted.
2.Fixedassetsforwhichdepreciationcannotbecalculated.
3.Determinationoftaxationbasisforfixedassets.
4.Depreciationoffixedassetscalculatedaccordingtothestraight-linemethodisallowedtobededucted.
5.UnlessotherwisespecifiedbytheStateCouncil’sfinancialandtaxationauthorities,theminimumperiodforcalculatingdepreciationoffixedassets.
6.Forenterprisesengagedintheexploitationofmineralresourcessuchaspetroleumandnaturalgas,theexpensesincurredbeforecommercialproductionandthedepreciationanddepreciationmethodsofrelatedfixedassetsshallbeseparatelystipulatedbythefinancialandtaxationauthoritiesoftheStateCouncil.
Productivebiologicalassets
1.Productivebiologicalassetsarebiologicalassetsheldbyenterprisesfortheproductionofagriculturalproducts,theprovisionoflaborservicesorleasing,etc.,includingeconomicforests,firewoodforests,andlivestockAnddraughtanimals.
2.Themethodfordeterminingthetaxbaseofproductivebiologicalassets.
3.Depreciationofproductivebiologicalassetscalculatedaccordingtothestraight-linemethodisallowedtobededucted.
4.Theminimumperiodforcalculatingdepreciationofproductivebiologicalassets.
Intangibleassets
1.Intangibleassetsamortizationexpensesarededucted.
Whencalculatingtaxableincome,theamortizationexpensesofintangibleassetscalculatedbyenterprisesinaccordancewithregulationsareallowedtobededucted.However,thefollowingintangibleassetsarenotallowedtobedeductedfromamortizationexpenses:intangibleassetsforwhichself-developedexpenseshavebeendeductedwhencalculatingtaxableincome;self-createdgoodwill;intangibleassetsthathavenothingtodowithbusinessactivities;otherintangibleassetsthatcannotbedeductedfromamortizationexpensesassets.
2.Themethodfordeterminingthetaxbaseofintangibleassets.
3.Theamortizationcostofintangibleassetscalculatedaccordingtothestraight-linemethodisallowedtobededucted.Expensesonpurchasedgoodwillmaybedeductedwhentheenterpriseistransferredorliquidatedasawhole.
4.Theamortizationperiodofintangibleassetsshallnotbelowerthan10years.Asaninvestmentortransferofintangibleassets,iftheusefullifeisstipulatedintherelevantlawsorinthecontract,itmaybeamortizedininstallmentsinaccordancewiththestipulatedoragreedusefullife.
Long-termdeferredexpenses
Whencalculatingthetaxableincome,theexpensesincurredbytheenterpriseasstipulatedbytherelevantlawsareregardedaslong-termdeferredexpenses.Ifamortizedinaccordancewiththeregulations,deductionsareallowed.
Investmentassets
Duringtheperiodofacompany’sforeigninvestment,thecostofinvestmentassetsshallnotbedeductedwhencalculatingthetaxableincome.
Inventory
Thecostofinventorycalculatedinaccordancewiththeregulationswhenanenterpriseusesorsellsinventoryisallowedtobedeductedwhencalculatingthetaxableincome.
(7)Assetloss