Every country has tax measures adjusted to the social, economic, and cultural conditions of a country. Accounting and tax play significant roles in the personal finance of a person. Taxation also indicates the income and credit standing of a person in a country as reflected in the Income Tax Return.
Accounting is the accurate bookkeeping of financial transactions while a tax payment is a specific duty of a person to fulfill the requirements set by the government. Accounting is used to compute the tax a person must pay to the government. The role of accounting and tax in personal finance is to boost the person’s capacity in responding to the government’s call for a better citizenry.
A person’s determination of tax liability is called a tax measure. Income tax, for instance, is based on the assessment of the yearly income of a person. Real property tax is computed out of the total property or land assets of a person. The taxpayer must show competent financial record keeping of all his finance using the tools of accounting, to enable a precise calculation of the tax due to the government.
In the Philippines, a health measure was converted into a tax measure that became known as “sin tax.” Republic Act 10351, or the Sin Tax Reform Law is primarily a health measure with revenue implications, simplified in the current excise tax system on alcohol and tobacco products addressing public health issues relating to alcohol and tobacco consumption.
The person or business organization needs to be informed about all the tax laws of the country partly to use these as leverage in the payment of taxes. Financial record keeping must be made up to date, and in this regard, almost everyone will need the services of a professional bookkeeper who can organize the records based on available receipts of the individual. This is the role of accounting relative to the tax measures.
Accounting and tax measures in personal finance are tools that can be used to solve the financial transaction organization problems of an individual and be able to meet the tax payment deadline imposed by the government with high accuracy. Once the financial record is organized within a given period, such information can be used to estimate the amount of tax an individual would have to pay for the year, including how much tax shelter can be availed of as permitted by the tax laws of the country.
A government may lower the income tax of a working individual by legislation and at the same time increase taxes on auto purchases and fuel. These are tax measures. Measures may vary from one government administration to another, and when they do, the accounting process may also slightly vary.
Accounting and taxation would play a more prominent role in enhancing an individual’s financial position. Personal finance is both a status and a state of financial condition of an individual, group or company. When a person begins to realize the importance of strengthening his or her financial situation, it is also a preparation to meet unexpected financial demands today or in the future.