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Issues in Accounting Assignment

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Added on  2021-06-16

Issues in Accounting Assignment

   Added on 2021-06-16

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Running head: ISSUES IN ACCOUNTING THOUGHT 1Issues in Accounting ThoughtNameInstitution
Issues in Accounting Assignment_1
ISSUES IN ACCOUNTING THOUGHT 2Question 1ArticleStapinski, H. (22 March 2018). The Actor incorporates. Retrieved from https://www.nytimes.com/2018/03/22/nyregion/the-actor-incorporates.html?rref=collection%2Ftimestopic%2FAccounting%20and%20AccountantsIntroductionThis newspaper article explains the problem that actors and actresses face when theywant to save their coins and how taxation impacts on this. It talks about how may prefer toincorporate and how accountants can help them to ensure that they include their money well.BodyDue to the new tax law in America, millions of actors and actresses in New York Cityhave been going to their accountant's offices with an agenda to incorporate their money to save.James Yaegeshi who is an actor has also found himself going to his accountant's office toinclude. Craig Manzino, who is an accountant that specializes in the entertainment industry, saysthat it has been non-stop and everyone wants advice (Schaltegger & Burritt, 2017).The tax rate has dropped by 3%, and the standard deduction has doubled. However, thepeople that work in the entertainment industry cannot deduct the significant expenses thatcontribute to their success. In the new tax law expenses like taking acting classes, buying scriptsfor auditions and voice lessons are not deductible (Price, 2017). Mr. Manzino said that manyactors are spending 20% to 30% of their income to generate jobs. However, if one is a trainer,lawyer or works for the Yankees, then they do not have to worry about these expenses (Seele &Gatti, 2017).
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ISSUES IN ACCOUNTING THOUGHT 3Adam Donshik who is an actor decided to form his entity in December said that for himhe was used to deducting haircuts, headshots, clothing and travel expenses. After the new taxlaw, he had to make some changes if he wanted to make a living wage because it was the onlyway to survive. Incorporating helps the hidden expenses to be canceled out. As much ascombining is an excellent way to save money it also has costs of its own. The initial fees usuallycost around $1000, but there are other costs that a person must pay when they are newlyincorporated. These costs include social security, Medicare, corporate taxes and bookkeepingand accounting costs. All summed up it usually adds up to $20000.People in the entertainment industry should also know that once they are incorporated,they will no longer receive unemployment benefits if they are out of work. Generally, Mr.Manzino says that organizing is not for everyone and it will not save money for everyonebecause of different situations. Some factors that need to be considered before incorporating aresuch as if one is single, married, rents or owns and also the income. For an entertainer that earns$200000 then they are encouraged then they are highly encouraged to incorporate as compared tothose that make $38000 which is the standard salary for most actors and actresses.This excludes actors that have support jobs such as working at Starbucks because theirincome cannot include this. For most New York workers earning money that is worthincorporating means lucrative commercial work or steady gigs such as in television series. Mr.Yagaeshi says that he knew a lot of his friends that combined but only decided to make it officialafter the new tax laws. He says that working in a show means leaving in New York and since hehas a family in New York he has to pay for two shows which create a dent in his pocket, thusdeciding to incorporate (Kaya, 2017).
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ISSUES IN ACCOUNTING THOUGHT 4Accountants have also encouraged their clients to put money in retirement plans becauseit saves money on taxes, but not everyone can afford to do this. Mr. Manzino says that one of theproblems of advising clients this year is that the Internal Revenue Service has not issuedguidelines on interpreting the new law hence the organization is left guessing. Another challengethat they face is trying to figure out if an actor's income will remain the same as the previousyear to cancel out costs for incorporating (Smith, 2017).Theories that relate to the issues in the articlePositive accounting theoryThe positive accounting theory's primary aim is to explain and predict what wouldhappen in an accounting practice and therefore it is not prescriptive. For example in this case,when the accountant wants to incorporate, he or she will have to predict the actor's income in thenext year. Therefore this shows that they do not know what the salary ought to be but rather whatit will be.Another issue that this theory relates to is when actors have to try and predict ifincorporating will save them money or not. For some, it will not depend on factors such asmarital status and for others, it will. That's why instead of trying to figure out what will happen,actors are streaming into the offices of accountants to figure out a plan (de Villiers & Maroun,2017).Some of the assumptions in this theory areIt is not prescriptive. The theory tries to predict and explain what will happen in anaccounting practice rather than describing it. For example, the accountants will have to predictthe future earnings of an actor to commence incorporation.
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