CREATE YOUR OWN BUNDLE OF TEMPLATES! CLICK HERE TO FIND OUT!

INVESTMENT

The investments most commonly found on the books are stocks and bonds and, in some cases, real estate not used in actual business operations. The following procedures should be conducted in the examination of investments, if such are material assets of the taxpayer:

  1. Familiarize with the nature of investments, utilizing any records maintained by the taxpayers such as the investment ledgers, worksheets showing the breakdown of investments and other investment records.
  2. Analyze sales and other credit entries to the account. If stocks sold are listed in the stock market, test check selling price of stocks sold at the prevailing “close” price at the Philippine Stock Exchange during the date of sale. Real properties sold should not fall below fair market value and/or zonal value where the zonal value has been established. The application of the “whichever is higher” rule shall be observed.
  3. Verify journal entries to ascertain the selling price and gain on sale of investments. Vouch supporting documents such as deeds of sale, proof of remittance of taxes withheld, payment of documentary stamp tax and other relevant records.
  4. Investigate sales to related parties and/or officers or stockholders below fair market value.
  5. Cross-check all investments during the year to the interest, dividend or rental income accounts.
  6. If investments or bonds were acquired at a premium or discount, determine whether the premium/discount is amortized over the life of the bond.

 

Reference: RAMO 1-2000