Why does the T2 Scehdule 1 add the opening grain inventory balance to taxable income and subtract the closing inventory? This removes the COGS from taxable income.


You're obviously talking about a farm corporation. 99% of these file their taxes on a cash basis, but the standard way of reporting income and expenses from an accounting perspective is by using the normal accrual based system. The purpose of the Schedule 1 adjustments is to convert those accrual-based amounts so that the farm is calculating it's tax bite on the cash basis.

That's the same reason for adding the opening A/R and prepaids plus closing A/P and deducting the opening A/P and closing A/R and prepaieds.

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