Tuesday, August 23, 2011

Finance and Management - 32

In the last blog, we looked at the concept of amortization. In today's blog we look at the reason for taxes to be charged to a corporate.

Any company operates within the jurisdiction of a particular country or a state. The policies of a government aid creating an ecosystem that allows the companies could use to their advantage. Government in many ways is the largest entrepreneur who takes enormous risk and tries to drive other people into action. It does this through their policies and gives a binding through the legislation. The judiciary ensure that the just and fairness are the bedrock of country's progress. We shall deal further on various laws that have an implication on business at a later stage.

The government for all these activities and more requires the funding, and a portion of this is taken from the corporate and individuals in the form of tax. The profit and loss account of companies shows this component of tax begin deducted from the profit earned.

This tax earned by the government is again ploughed back to the system by which it (government) can take up activities to encourage greater prosperity

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