Cash Based Income Tax Returns
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In this 8th and final course of the Federal Tax Return Analysis Skill Series, participants will transform cash-based tax returns into accrual income statements, compare performance ratios from cash-based and accrual statements, examine differences in income reporting, and assess the importance of using accrual statements for analysis.
Certificate
1 credit or $295
Cost
1.5 - 2 Hrs.
Duration
1 hr.
Prep Time
1
Quiz
Overview
In the eighth and final webinar session, participants review the methodology for transforming the quasi-income statement - reported on a cash rather than accrual basis - for a partnership, limited liability company or Subchapter S corporation - Schedule 1065 and Schedule 1120S - into an accrual income statement, using information in Schedule K, Schedule M-1, and associated statements. They explore the differences in key performance ratios computed from cash-based business income tax returns and accrual financial statements. In addition, participants examine the differences between ordinary business income reported on a cash basis on Schedule 1065 or Schedule 1120S and actual Business Cash Income reported on the Uniform Credit Analysis (UCA) cash flow statement. Further, they assess the importance of identifying the source of cash to service interest-bearing debt, as well as the necessity of using accrual financial statements for ratio and cash flow analysis.
Who Should Attend
This Course is ideal for participants currently in or aspiring to enter the following job functions:
- Credit Management
- Commercial Credit Administration
- Commercial Loan Administration
- Commercial Loan Portfolio Management
- C & I Lending
- Corporate Lending
- Loan Review
- Special Assets
- Internal Audit
- Non-Profit and Municipality Lending
- Health Care Provider Lending
- Specialized Lending
- Credit Analysis
Prerequisites
Familiarity with accrual financial statements and the use of ratios and cash flow statements in assessing borrower risk.
Objectives
By the end of the webinar session, participants will be able to:
- Identify information on cash-based business income tax returns for a partnership and for a Subchapter S corporation necessary to convert Schedule 1065 and Schedule 1120S to an accrual income statement, which allow proper construction and interpretation of key performance ratios.
- Construct a modified Uniform Credit Analysis (UCA) cash flow statement using a converted accrual income statement and information in Schedule L and supporting statements.
- Identify differences between ordinary business income on Schedule 1065 prepared on a cash basis and Business Cash Income on the UCA cash flow statement and assess their importance.
- Compare and contrast the messages provided by the UCA cash flow statement and Schedule 1065 about the borrowing causes, the cash sources of debt service, the financing requirement, and the cash sources used to meet the financing requirement.
- Assess the role that borrower balance sheet and income statement management play in explaining cash flow results for the period and the resulting implications about meeting future debt service obligations.
- Understand the necessity of combining cash-based business income tax return information and accrual financial statement information to fully assess the financial status and risk profile of a borrower.
Materials(access provided with registration)
- Credit Refresher on Cash Based Income Tax Returns
- Form 1065 for Carter Park Mill Works
- Exercise for the Session 8 Webinar
- Webinar Presentation Slides
- Webinar Poll Questions
- Webinar Poll Solutions
- Exercise Solutions
This is Course 8 of 8 in the Federal Tax Return Analysis Skill Series
Business Income Tax Returns
The Section 179 Deduction
Understanding Schedules K-1
Personal Income Tax Returns and Cash Flow
Schedule M-1 and the Accrual Income Statement
Business Income Tax Returns and Ratio Analysis
Business Income Tax Returns and Cash Flow Analysis
Cash Based Income Tax Returns
