Income Tax Deductions and Different Types of Accounting Methods

Discussion Questions
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Response to question 1
A person determines the amount of items donated for deductions on their income taxes by adding up the amount of money and/or the actual cost of gifts that they donated to a nonprofit group which is recognized by the IRS. The donation can only be deductible if it goes to an IRS-approved nonprofit organization. The taxpayer will itemize his/her deductions after claiming donations he/she makes to qualified charitable organizations such as a nonprofit charitable group, a nonprofit educational group, and a nonprofit religious group (Trent, 2013). The kind of documentation needed include a cancelled check, a receipt bearing the name of the charity organization and the donation amount, credit card statement, and bank or credit union statements. The bank records have to show the amount of donation, the date, and the name of the nonprofit group (Trent, 2013).
Response to question 2
The are 2 different types of accounting methods: cash method and accrual method. (i) Cash method: this is widely utilized in small businesses. Using this method, income is not counted until check or cash is really obtained, and expenditures are not counted un...