Transylvania University,Faculty of Economics and BusinessAdministration,2nd Year,Group 8811

Business Taxation
SC BETA S.R.L

Conf. dr. BABA MIRELA

Student : Ioana Chima

Contents

Chapter 1 : Theoretical considerations about taxes 1.1 General considerations regarding taxes 1.2 Presentation of direct taxes
1.2.1 Profit tax 1.2.2 Income tax 1.2.3 Dividend tax 1.2.4 Local tax

1.3 Presentation of indirect taxes

1.3.1 Value added tax 1.3.2 Customs duty 1.3.3 Axcises

Chapter 2 : Company Presentation

2.1 Short History 2.2 General Presentation of the company 2.3 The organisational structure (organization chart) 2.4 Trading Partners 2.5 Field of activity

Chapter 3 : Case Study

Chapter 1 : Theoretical considerations about taxes

1.1 General considerations regarding taxes
A tax (from the Latin taxo; "rate") is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many administrative divisions. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent. A fee charged ("levied") by a government on a product, income, or activity. If tax is levied directly on personal or corporate income, then it is a direct tax. If tax is levied on the price of a good or service, then it is called an indirect tax. The purpose of taxation is to finance government expenditure. One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning. Since public goods and services do not allow a non-payer to be excluded, or allow exclusion by a consumer, there cannot be a market in the good or service, and so they need to be provided by the government or a quasi-government agency, which tend to finance themselves largely through taxes.

1.2 Presentation of direct taxes

A tax that is paid directly by an individual or organization to the imposing entity. A taxpayer pays a direct tax to a government for different purposes, including real property tax, personal property tax, income tax or taxes on assets. Direct taxes are different from indirect taxes, where the tax is levied on one entity, such as a seller, and paid by another, such a sales tax paid by the buyer in a retail setting.

A direct tax cannot be shifted to another individual or entity. The individual or organization upon which the tax is levied is responsible for the fulfillment of the tax payment. Indirect taxes, on the other hand, can be shifted from one taxpayer to another. In Romania the corporate income tax rate and the personal income tax rates for 2013 are 16%. In comparison in Italy the tax rate for an individual is between 23%-43%. In addition to direct taxation (IRPEF), there is also a regional tax of 1.2%-2.03% and a municipal tax of 0.1%-0.8%. There are reduced rates of tax and tax exemptions available to certain income earners. The standard rate of Italy corporate tax (IRES) in 2013 is 27.5%%. In addition, local tax (IRAP) is imposed at a rate of generally 3.9%, bringing the effective tax rate to 31.4%. 1.2.1 Profit tax Tax profit or taxable profit is used to distinguish between accounting profit or earnings (the number that is generally referred to in financial results for public companies and quoted in the press). Taxable profit is the number that is used to calculate tax on income. For a number of reasons, taxable profit may differ from reported earnings, and may be higher or lower. Company financial reports often distinguish between profit before tax and after-tax profit. 1.2.2 Income tax An income tax is a government levy (tax) imposed on individuals or entities (taxpayers) that varies with the income or profits (taxable income) of the taxpayer. Details vary widely by jurisdiction. Many jurisdictions refer to income tax on business entities as companies tax or corporation tax. Partnerships generally are not taxed; rather, the partners are taxed on their share of partnership items. Tax may be imposed by both a country and subdivisions thereof. Most jurisdictions exempt locally organized charitable organizations from tax.

Income tax generally is computed as the product of a tax rate times taxable income. The tax rate may increase as taxable income increases (referred to as graduated rates). Tax rates may vary by type or characteristics of the taxpayer. Capital gains may be taxed at different rates than other income. Credits of various sorts may be allowed that reduce tax. Some jurisdictions impose the higher of an income tax or a tax on an alternative base or measure of income. 1.2.3 Dividend tax A dividend tax is an income tax on dividend payments to the stockholders (shareholders) of a company. Dividends can be taxed either as ordinary income at ordinary income tax rates or at the preferred long-term capital gains tax rate. Dividends are classified either as ordinary dividends or as qualified dividends. All dividends are ordinary dividends. Some dividends are qualified dividends and qualify for the preferred tax rate of 0% or 15%. 1.2.4 Local tax A tax assessed and levied by a local authority such as a county or municipality. A local tax is usually collected in the form of property taxes, and is used to fund a wide range of civic services from garbage collection to sewer maintenance. The amount of local taxes may vary widely from one jurisdiction to the next. Unlike federal or state taxes, the benefits arising from local taxes are generally apparent at the community level. Municipalities have to face a constant balancing act with regards to levying local taxes, since rising taxes may lead to "taxpayer revolt," while low taxation levels may lead to a cutback of essential services.

1.3 Presentation of indirect taxes

A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. An indirect tax is most often thought of as a tax that is shifted from one taxpayer to another, by way of an increase in the price of the good.Customs duties levied on imports, excise duties on production, sales tax or value 5

added tax (VAT) at some stage in production-distribution process, are examples of indirect taxes because they are not levied directly on the income of the consumer or earner. Indirect taxes can also be defined as fees that are levied equally upon taxpayers, no matter their income. This is a primary reason why they are thought of as taxes that are passed on, as the price of the tax is compensated for by simply increasing the overall price of the good or service. Some economists argue that indirect taxes lead to an inefficient marketplace and alter market prices that don't match their equilibrium price. 1.3.1 Value added tax (VAT) A type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. Value-added tax (VAT) is most often used in the European Union. The amount of value-added tax that the user pays is the cost of the product, less any of the costs of materials used in the product that have already been taxed. The value added to a product by or with a business is the sale price charged to its customer, minus the cost of materials and other taxable inputs. A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products. 1.3.2 Customs duty A tax levied on imports (and, sometimes, on exports) by the customs authorities of a country to raise state revenue, and/or to protect domestic industries from more efficient or predatory competitors from abroad. Customs duty is based generally on the value of goods or upon the weight, dimensions, or some other criteria of the item (such as the size of the engine, in case of automobiles).

1.3.3 Axcises An excise or excise tax (sometimes called a duty of excise special tax) is an inland tax on the sale, or production for sale, of specific goods or a tax on a good produced for sale, or sold, within a country or licenses for specific activities. Excises are distinguished from customs duties, which are taxes on importation. Excises are inland taxes, whereas customs duties are border taxes. An excise is considered an indirect tax, meaning that the producer or seller who pays the tax to the government is expected to try to recover or shift the tax by raising the price paid by the buyer.

Chapter 2 : Company Presentation

2.1 Short History

The company SC BETA S.R.L was founded in 2010,according to the Law no. 31/1990 concerning trading companies and recongnized by the incorporation document registered and approved by the Trade Register Office, with a share capital of 50.000 lei divided into 50 shares with a nominal value of 1000 lei. The contributions of the two shareholders are divided as follows : structure : 1st partner 60% - meaning 30 shares ; 2nd partner 40% - meaning 20 shares. bank accounts : 30.000 lei ; lands : 10.000 lei ; equipment : 6000 lei ; raw materials : 4000 lei ;

The share capital is totally paid by the two shareholders and have the following

At the beginning of 2013,the company opened a new filial in Timisoara,which is an extra source of profit and also a good chance for our company to became known on the international market.

2.2 General Presentation of the Company

Name : SC. BETA S.R.L The registered office : Str. Alecsandru Ioan Cuza, no. 35, Brasov Phone : +40(0) 268406050 Fax : +40(0) 268473302

Registration number : J35/87/10 Fiscal code : R2499005 Legal form : limited liability company Duration of operation : unlimited

2.3 The organisational structure (organization chart)

Chief executive officer

Chief Production Officer

Chief Financial Officer

Commerci al Manager

Chamber management

Furniture management

Accounting

Secretariat

Transport

Supply

Sale

2.4 Trading Partners

Suppliers SC Bechi Forest SRL SC BrandCars SRL Electrica SA Compania Apa Brasov Customers SC Impex SRL GRADIENT SRL Unik Design

2.5 Field of Activity

The company`s field of activity is the production of furniture for national market. Our product range is diverse and it is based on the customer`s needs and requests.

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Chapter 3 : Case study

3.1 Accounting monograph

Account symbol 1012 5121 2131 2111 301 401 5311 4111 371 121 Account name Subscribed and paid in share capital Cash at bank in lei Plant and machinery Freehold land Raw materials Suppliers Petty cash in lei Customers Goods purchase for resale Profit(loss) for the period Total No. 1 Accounting Operation On August 2 it is aquired,with invoice no. 235/2.08, from SC Bechi Forest SRL,raw material in value of 8000 lei,VAT 24%.The payment will be made later. On 6 August with PO no 125/6.08 the invoice Receivable % 301 Raw materials 4426 Input VAT 1920 101.400 Accounts Creditor 401 Suppliers Balances Receivable (debitoare) Creditor (creditoare) 50.000 30.000 6.000 10.000 4.000 31.900 22.000 25.000 4400 19.500 101.400 Sum lei 9920 8000

401 Suppliers

5121 Cash at bank

9920

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235/2.08 is paid. The payment of the electricity and water consumption shall be recorded in value of 1200 lei.VAT 24%.

% 605 Electricity, heating and water 4426

401 Suppliers

1488 1200

288 401 Suppliers 31000 25.000 6000

It aquires a car in value of 25.000 lei,VAT 24%,from SC BrandCars made in 5 September by

Input VAT % 2133 Motor vehicles Input VAT 4111 Customers

SRL.The payment will be 4426 Promissory Note. It sells merchandise to SC Impex SRL ,according to invoice no 365/15.08, in value of 12.000 lei,VAT 24%.Acquisition value of the merchandise sale is 4400 lei. It shall be recorded the getting out of the discharge of goods sold. On 19 August,on the bases of the invoice no. 365/15.08 it collects in cash,from SC Impex 8 SRL,the sum 14.880 lei. On August 25,based on a cash cheque it withdrew 542 Cash advances 5311 Petty cash in lei

% 707 Sale of goods purchased for resale 4427 Output VAT

14.880 12.000

2880

607 Goods for resale 5311 Petty cash in lei

371 Goods purchase for resale 4111 Customers

4400

14.880

25.000

12

25.000 lei for the purpose of granting an advance toward settlement.The advance was granted to an employee, who leaves in delegation for buying 9 some goods. The employee accounted the advance as follows : 8000 lei the purchased materials and 1000 lei transport and accommodation 10 expenses. It is registered pay bill in value of 7000 lei. 11 The statutory deductions from salaries,tax rate 16 %. % 625 Travel 301 Raw materials 5311 Petty cash in lei 641 Salaries 421 Employeessalaries payable 421 Employeessalaries payable % 4312 Employees contribution to pension fund 4314 Employees contribution to health insurance 4372 Employees contribution to unemployment fund 35 385 7000 735 2000 7000 5000 542 Cash advances 25.000 1000

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444 Tax on salaries 12 The salaries are paid. 421 Employeessalaries payable 13 On 31 August shall be registered the closing of VAT accounts. 14 15 On 31 August shall be registered the closing of income accounts. 16 On 31 August shall be registered the closing of expenses accounts. 4427 Output VAT 4424 VAT Recevaible 707 Sale of goods purchased for resale 121 Profit(loss) for the period 4426 Input VAT 4426 Input VAT 121 Profit(loss) for the period 607 Goods for resale 605 Electricity, heating and water 625 Travel 301 Raw materials 641 Salaries 5311 Petty cash in lei

1120

5880

2880 5400

14.880

4400

1200

1000 13000 5880

14

3.2 Registration and calculation of VAT

a)Input VAT 1. On August 2 it is aquired,with invoice no. 235/2.08, from SC Bechi Forest SRL,raw material in value of 8000 lei,VAT 24%.The payment will be made later. 24% * 8000 = 1920 4426 = 401 1920 2. The payment of the electricity and water consumption shall be recorded in value of 1200 lei.VAT 24%. 24% * 1200 = 288 4426 = 401 288 3. It aquires a car in value of 25.000 lei,VAT 24%,from SC BrandCars SRL.The payment will be made in 5 September by Promissory Note. 24% * 25.000 = 6000 4426 = 401 6000 D NC1: 1920 NC3: 288 NC4 : 6000 RD : 8280 TSD : 8280 b) Output VAT 1. It sells merchandise to SC Impex SRL ,according to invoice no 365/15.08, in value of 12.000 lei,VAT 24%.Acquisition value of the merchandise sale is 4400 lei. 24% * 12000 = 2880 D NC13 : 2880 RD : 2880 TSD : 2880 c) Receivable VAT 4426 = 8280 4427 = 2880 Output VAT NC5 : 2880 RC : 2880 TSC : 2880 C Input VAT NC13 : 2880 NC 14 : 5400 RC : 8280 TSC : 8280 C

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4426>4427 => Receivable VAT = 8280 2880 = 5400 4426 = % 8280 4427 2880 4424 5400 D ND 14 : 5400 RD : 5400 TSD : 5400 Receivable VAT RC : 0 TSD : 0 SFD : 5400 C

3.3 Trial Balance Sheet for August 2013

No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Acc. Opening Bank C 50.000 19.500 Current movement D C 25.480 14.880 25.000 13.000 4400 2480 14.880 7000 735 385 35 6480 2880 1120 9920 5880 8000 1200 4400 Total sum D 25.480 10.000 6000 17.000 4400 9920 39.880 5880 735 385 35 5328 6480 2880 1120 30.000 38.880 8000 1200 4400 C 50.000 34.380 25.000 13.000 4400 34.380 14.880 7000 735 385 35 6480 2800 1120 9920 5880 8000 1200 4400 Closing Bank Balance D C 50.000 8900 10.000 6000 25.000 4000 24.460 25.000 1120

Symbol Balance D 1012 121 2111 10.000 2131 6000 2133 301 4000 371 4400 401 4111 25.000 421 4312 4314 4372 4424 4426 4427 444 5121 30.000 5311 22.000 542 605 607

13.000 31.900 9920 14.880 5880 735 385 35 5328 6480 2880 1120 16880 8000 1200 4400

5328

20.080 33.000

16

24 625 25 641 26 707 Total

101.40 0

101.40 0

1000 7000 12.000 136.60 3

1000 7000 12.000 142.67 5

1000 7000 12.000 238.00 3

1000 7000 12.000 243.99 5

103.40 8

109.480

3.4 Balance Sheet at 31.08.2013

No A II Non current assets Tangible assets 1. Freehold land 2. Plant and machinery Total Current assets Stocks 1.Raw materials 2.Merchendise Total Receivables 1. Trade receivables 2.Other receivables (4312, 4424, 444) Total Petty cash and bank accounts ( 5121, 5311, 542) Current assets total C Short-term liabilities 1.Suppliers 2. Employees contribution to unemployment fund 8 9 31.900 24.460 35 3-7 85.400 98.143 3 4 4000 4400 8400 25.000 0 25.000 52.000 13.000 0 23.000 14.880 7183 22.063 53.080 2 1,2 6000 16.000 6000 16.000 1 Beginning of period 01.08 10.000 Enf of period 31.08 10.000

B I

II

5 6

III

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D E IV

Total Current Assets Liabilities Owners Equity 1.Capital Result of the exercise Profit Loss Shareholders' equity total

8,9

31.900 85.400 31.900 = 53.500

24.495 98.143 24.495 = 73.648 50.000 8900 73.648

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50.000 19.500 53.500

3.5 Financial and Econimic Indicators

a) Current Ratio = Current Assets/Current Liabilities = 98.143/24.495 = 4 Because the value of current ratio is 4,it shows us that the current assets are enough to settle current liabilities. b) Debt-to-Capital Ratio = Total Liabilities/Shareholders' Equity+ Liabilities = 24.495/50.000 + 24.495 = 0.32 It shows us that it is a lower risk and the assets are financed by shareholders` equity.

3.6 Profit and Loss Account

Name of the indicator Revenue from the sale of merchandise (707) Total Expenses with raw materials Expenses with merchandise Other expenses (605) No. Precedent 1 2 3 4 5 Financial exercise Concluded 12.000 12.000 13.000 4400 1200

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Personnel expenses 1. Wages Operating costs Financial Revenues Financial Expenses Extraordinary Revenues Extraordinary Expenses Total Revenues Total Expenses The result of the operation 1. Profit 2. Loss 12-13 13-12 13.600 6 7 8 9 10 11 12 13 7000 25.600 12.000 25.600

As you can see from the balance sheet our company has a loss of 13.600 in August 2013.

References
1.http://www.artifex.org.ro/departamente/biblioteca/Editura%20pt%20site %20artifex/liliana%20popa/Liliana%20POPA_final.pdf 2. http://bibliotecascolara.ro/Roxana_Circota/Contabilitate_financiaraMonografii_contabile-Roxana_Circota.pdf 3. accountingexplained.com 4. financial-dictionary.thefreedictionary.com 5. www.investopedia.com 6. static.anaf.ro

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7. contabilitateafirmei.manager.ro

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