Understanding the Difference between the IRC and GAAP

Summary

This practice note discusses the differences between book accounting as governed in the United States by generally accepted accounting principles (GAAP) and tax accounting as governed in the U.S. by the Internal Revenue Code (IRC). Most transactions have a financial component that eventually becomes recorded for both book and tax purposes. This guide helps attorneys understand the accounting implications of corporate tax transactions. Although corporate attorneys may never have to prepare a financial statement or a tax return, it is essential they have a basic accounting understanding to collaborate with their company’s outside auditors or troubleshoot accounting issues that may arise during corporate transactions.