BALANCING ALLOWANCE Meaning and
Definition
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A balancing allowance is a term used in the field of finance and taxation to describe a specific type of deduction or allowance that is granted to businesses or individuals. It is primarily used to offset any losses or expenses incurred in a particular tax year.
When a business or individual incurs a loss during a tax year, this loss can be offset against any profits or gains made in the same tax year. However, if the loss exceeds the profits, a balancing allowance can be claimed to further reduce the taxable income or liability. This allows the taxpayer to rectify the imbalance between losses and gains, ensuring a fair and equitable distribution of taxes.
The balancing allowance is usually calculated by deducting the total losses or expenses from the profits or gains earned during the tax year. This deduction is generally permitted by tax authorities as a means to promote fairness and equal treatment for taxpayers.
It is important to note that the specific rules and regulations regarding balancing allowances can vary between jurisdictions. Therefore, it is crucial for taxpayers to consult with tax professionals or reference the relevant tax codes to understand the exact eligibility criteria and calculation methods applicable within their specific tax jurisdiction.
Etymology of BALANCING ALLOWANCE
The etymology of the phrase "balancing allowance" can be understood by examining the origins and meanings of the individual words involved.
1. Balancing: The word "balancing" is derived from the verb "balance", which originated from the Old French "balencier" and earlier from the Latin "bilanx", meaning "two-scale". The concept of balancing refers to the act of bringing two or more things into equilibrium or equal distribution.
2. Allowance: The term "allowance" comes from the Old French word "aloier", which means "to grant". It ultimately derives from the Latin word "allaudare", comprising "ad" (to) and "laudare" (to praise). In its early usage, "allowance" referred to a sum of money or resources granted or given to someone as a favor or for a specific purpose.
