1.26 Ark. Code R. 51-401(a)

Current through Register Vol. 49, No. 10, October, 2024

Rule 1.26-51-401(a) - Accounting and Recordkeeping Requirements

Arkansas taxpayers must use the same accounting method as that used for federal income tax purposes.

Each taxpayer is required by Arkansas law to file an income tax return reflecting its 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 taxpayer's 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 after the return that such records support has been filed.

Essential accounting requirements 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. 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.

1.26 Ark. Code R. 51-401(a)