Accounting for United States treasury tax notes;

              Accounting Research
BULLETINS
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Issued by the Committee on Accounting Procedure, American Institute of Accountants, 13 East 41st Street, New York, N. Y.
Copyright 1942 by American Institute of Accountants
January, 1942 No. 14
Accounting for United States Treasury Tax Notes
THis BULLETIN deals with the reporting of United States Treasury Tax Notes in the balance sheet of the purchaser.
SUMMARY STATEMENT
(1) The usual procedure of showing the notes in the current asset section of the balance sheet is obviously proper, and especially should they be so shown if, at the date of the balance sheet, or at the date of the report of the independent auditor, there is evidence of intent to use the notes for other purposes or if such presentation is required under accounting definitions of applicable bond in-dentures or preferred stock agreements.
(2) Since the tax notes were presumably purchased with the intent that they be used for the payment of federal income and excess profits taxes, it is also good accounting practice that they be shown as a deduction from the accrued liability for such taxes in the current liability section of the balance sheet. The full amount of the accrued liability should be shown, and the tax notes should be deducted therefrom in an amount equal to their tax payment value at the balance-sheet date.
DISCUSSION
United States Treasury Tax Notes, Tax Series A-1943 and B-1943, have been authorized and issued under a "Tax Savings Plan" for the stated purpose of making it easier for taxpayers to meet the in-creasing taxes required by the National Defense Program. Tax-payers may purchase the notes while income is accruing for use as a medium of payment of the income and excess profits taxes subse-quently falling due. The notes are issued in the name of the pur-chaser; they cannot be transferred or used as collateral. They may be redeemed at the purchase price on or before maturity; no advance
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