The Influence of Misleading Terminology on the Company’s Finances

Gintaras Černius

Abstract


This article is concerned with financial terminology and with the eventual influence of financial terminology to the company’s finances. First of all, this fact is related to the application of terms such as “book-keeping,” “financial accounting” and “accounting” in practice, same as in a scientific literature. Second, a new term that is settling down in practice—“tax accounting”—is not only confusing, but it may also affect the company’s performance and results as well as its financial position.
The article is dedicated to the overview of the presently existing terms on accounting. It has been determined that different scientists apply different interpretations of the types of accounting, its quantity and correlation. The outcome of this diversity is erroneous interpretations of terminology in legislation, education, and also in practice.
This article identifies and argues the criteria of accounting classification for consumers of information and reports, the preparation of which requires the use of accounting data and accounting objects. The types of accounting proposed are distinguished on the basis of these criteria and interconnection between them is depicted. It has been established that, in order to avoid further confusion, it would be appropriate to clarify more explicitly the types of accounting in the Accounting Law of the Republic of Lithuania with a clear distinction of financial and management accounting as a separate and independent type.
One of the most essential findings of this article is the clear proof that the use of improper terms has a negative impact on the results declared in the financial reports. This is mostly related to the term “tax accounting,” which has appeared and become alarmingly pervasive over recent years.
The article presents a methodology of adjustment between accounting and taxes and its application in practice. The bottom line is that the financial accounts, which combine the data  collected from the accounting records, are prepared with strict regard to all Lithuanian andInternational standards that regulate the form and the content of the financial statements.
Corporate income tax return is prepared either in recalculating the data of financial accounts so that they would satisfy the rules of accounting for income taxes or by using the data compiled especially for this purpose. This methodology should be referred to by the scientists researching the questions of methodologies of accounting. This is the only way to avoid a threatening invasion of taxation rules to financial accounting.

Keywords


book keeping; financial accounting; tax accounting

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"Societal studies" ISSN online 2029-2244 / ISSN print 2029-2236