Expenses that cannot be deducted in the determination of the tax base according to tax laws and are therefore referred to as non-tax-deductible expenses are typically tracked in the account coded 689 in practice.
However, this usage can lead to some misjudgments during the company’s financial reporting. Therefore, our recommendation is that expenses classified as non-tax-deductible should be tracked in memorandum accounts, rather than being posted to account 689. It would be a more accurate practice to track these expenses in the relevant expense account without any transfers, and to monitor the portion of the expenses corresponding to non-tax-deductible expenses in the memorandum accounts. Tracking them in memorandum accounts will not only ensure more accurate reporting of the company’s expenses and allow for better evaluations but also provide convenience during budget preparation.
By using memorandum accounts, it will be easier to track how much of the expenses monitored in the 7-series accounts cannot be considered in the determination of the tax base when preparing the tax return.
Source: Istanbul Chamber of Certified Public Accountants
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