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Accounting Profit VS Taxable Profit the tax thereof is calculated which is to be paid by the company.

In this profit, disallowed expenses are added back.


For an accountant, profit means the excess of revenues over
expenses, which is known as Accounting profit. The concept of For Example – If the Assessment Year is 2015-2016, then the
accounting profit differs from taxable profit, in the sense that the Previous Year will be 2014-2015.
latter is the amount which is taxable as per the provisions of the
income tax act. It is calculated by taking into account accounting
profit and then adding the non-allowable expenses less allowable
expenses and the incomes credited in Profit and Loss account.
Key Differences Between Accounting Profit and Taxable
Profit
Take a read of this article excerpt that will provide you a thorough
understanding on the difference between accounting profit and The difference between accounting profit and taxable profit
taxable profit. can be drawn clearly on the following grounds:

Content: Accounting Profit Vs Taxable Profit The financial profit of the business is known as accounting
profit while the profit which is taxable is known as taxable
profit.
BASIS FOR ACCOUNTING TAXABLE
COMPARISON PROFIT PROFIT The return is furnished to the relevant department in case of
taxable profit while accounting profit is publicly at the end of
the financial year.
Meaning The term accounting The term taxable
profit refers the profit refers to the Financial Audit is conducted for recognizing correct accounting
company's income profit of the profit. On the other hand, Tax Audit is carried out for
obtained after business which is recognizing the actual taxable profit.
reducing total taxable as per
expenses from total income tax rules. Accounting profit is used for the purpose of knowing
revenues. company’s profitability in the specified period while the
Taxable profit is used for the purpose of identifying the tax
payable by the company.
Basis Accounting Standard Income Tax Act Accounting Profit is for a particular financial year while Taxable
1961 Profit is for the previous year assessed in the assessment
year.

Year Financial Year Income of


Previous Year is
Taxable in
Assessment Conclusion
Year.
There are many points which differentiate the two entities which
are discussed here in detail. In simple words, both of them are
Objective To know the To know the correct in their place. Accounting Profit is calculated as per the
profitability and taxability of the generally accepted accounting principles and assumptions while
performance of the entity. the taxable profit is calculated as per the prescribed tax rules of
entity. every country which allows a company to reduce its tax liability.
To know the taxability Both the profits are calculated for a specific period. Many times
of the entity. accounting profits is greater than the taxable profit.

Audit Financial Audit Tax Audit

Definition of Accounting Profit

Accounting Profit is the result of operating and non-operating


activities of the company. It is the actual financial gain obtained
after reducing total expenses from total revenue of the business.
It reflects the company’s profitability and performance in the
future. It also determines that how accurately the resources of the
entity are allocated.

For knowing the company’s liquidity and solvency, accounting


profit is very helpful to the users of the financial statement.

The financial year starts from 1st day of April and ends on the
31st day of March.

Definition of Taxable Profit

The amount of profit which is taxable as per the Income Tax Act,
1961 under the head Profit and Gains from Business or
Profession, is known as taxable profit. It is derived by taking
accounting profit as a base. Every year the return is furnished to
the income tax department for the previous year in the
assessment year. On the basis of this return the taxable profit and