GAAP and tax adjustments overview

At the end of the fiscal year, companies reconcile their accounting for Generally Accepted Accounting Principles (compliance) and tax rules. As a result of these reconciliations, several adjustments are proposed for these organizations to be compliant.

It’s typical to post these adjustments without changing historical monthly amounts for the fiscal year to maintain the integrity of the operational reporting. Examples of these adjustments are depreciation, amortization, and tax liability.

You can use GAAP and tax adjustment journals to post adjustments separately. Then you have the option to report on the adjustments separately, or in combination with your actual books.

For example, the following financial report includes columns for adjustments that have been made—one column for GAAP adjustments and another for adjustments entered in a user-defined book. The last column combines the Accrual book with the adjustments. Learn more about reporting on GAAP or tax books.

An example report showing revenue for the prior quarter.

  • Column 1: Accrual book
  • Column 2: User-defined book; in this example, Real Estate book
  • Column 3: GAAP book
  • Column 4: Combined books; in this example, accrual + Real Estate + GAAP
The ability to create GAAP and tax adjustment journals is a configuration option that your administrator can select for the general ledger. Learn more about setting up GAAP and tax adjustments.