Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 05 - Division of Revenues
Regulation 1997-4 - Comprehensive Individual Income Tax Regulations
Rule 26-51-401 - TAX YEAR - ACCOUNTING METHOD
Rule 1.26-51-401(a) - Method of Accounting
Current through Register Vol. 49, No. 9, September, 2024
It is recognized that no uniform method of accounting can be prescribed for all taxpayers, and the law contemplates that each taxpayer shall adopt such forms and systems of accounting as are in his judgment best suited to his purpose. Arkansas taxpayers must use the same accounting method as that used for federal income tax purposes.
Each taxpayer is required by law to make an income tax return reflecting his true and correct income. Therefore, adequate accounting records and source documents must be retained to justify that the filed income tax returns are a true and correct accounting of the taxpayers transactions for each tax year. As a general rule, the accounting records and source documents should be retained for a minimum of six (6) years.
The essential elements are as follows:
(1) In all cases in which the production, purchase or sale of merchandise of any kind is an income-producing factor, inventories of the merchandise on hand (including finished goods, work in process, raw materials, and supplies) should be taken at the beginning and end of the year and used in computing the net income for the tax year.
(2) Expenditures made during the tax year should be properly classified as between capital and expense; that is to say, expenditures for items of plant, equipment, etc., which have a useful life extending substantially beyond the tax year should be charged to a capital account and not to an expense account; and
(3) In any case in which the cost of capital assets is being recovered through deductions for wear and tear, depletion or obsolescence, any expenditure (other than ordinary repairs) made to restore the property or prolong its useful life should be added to the property account or charged against the appropriate reserve and not to current expenses.
