CHAPTER 1 – INCOME TAX
STATEMENT OF FINANCIAL POSITION:
ASSETS:
Non-Current assets:
PPE
Deferred tax (Dt) Amount calculated in deferred tax note.
Current assets:
Prepaid expense
EQUITY & LIABILITIES:
Non-current liabilities:
Deferred tax (Cr)
Current liabilities:
Income received in advance Amount calculated in deferred tax note.
STATEMENT OF COMPREHENSIVE INCOME:
Profit before tax
(Income tax expense) 2
Profit after taxation
• IRIA – year received xx
- next year (xx)
• PE – year paid (xx)
- next year xx
WEAR AND TEAR CP x % No residual For the whole year
RECOUPMENT SP -TB TB = CP – W&T SP limited to CP
CAPITAL GAINS (SP – CP) x 80% …. X 20% - Tax recon
NOTES FOR THE STATEMENT OF FINACIAL POSITION:
1. INCOME TAX EXPENSE:
Main components of income tax:
Current tax expense
Deferred tax expense/(income)
(Deferred tax income relating to increase in tax rate end of the year)
Tax rate reconciliation
Accounting profit Profit before tax
Tax at the standard rate of 28% Profit x 0,28
Non-taxable income:
Profit on the disposal of equipment
(Dividends received)
(Capital gains) Rxx X 20% X 28% Amount x 0,28
Non-deductible expenses: tax penalty paid
(Tax allowance received)
Deferred tax expense relating to an increase in tax rate at the beginning of the year
(Deferred tax (income) relating to increase in tax rate end of the year)
Non-deductible fines
Non-deductible donations
Income tax expense
, 2. DEFERRED TAX:
Analysis of temporary differences:
Tax allowances on PPE
Prepaid expenses
(Income received in advance)
(Capital allowances)
(Tax loss)
(Provision for leave pay)
Deferred tax liability/(asset)
CALCULATIONS:
1. CURRENT TAX:
Profit/(loss) before taxation
Depreciation - acc
(Wear-and-tear – tax)
(Profit on disposal of equipment – acc)
Loss on disposal equipment - acc
Capital gain (80%) - tax
Recoupment of wear-and-tear - tax
Tax penalty paid - acc
(Tax allowance received – tax)
Insurance premiums paid in advance - tax
(Loss – prior year)
Fines
Donations
Provision for leave pay Previous year – current year
(Dividends received)
Taxable income/(loss)
Current taxation
2. DEFERRED TAX:
CP TB TD DT DT
Asset xx xx xx xx Cr
Prepaid Expense xx - xx xx Cr
IRIA (xx) - (xx) (xx) Dt
Loss 0 xx (xx) (xx) Dt
Insurance xx 0 xx xx Cr
Prov. for leave (xx) 0 (xx) (xx) Dt
Research 0 xx (xx) (xx)
Dt – deductible
If asset is sold it does not come in Deferred tax calculation.
Cr – taxable
STATEMENT OF FINANCIAL POSITION:
ASSETS:
Non-Current assets:
PPE
Deferred tax (Dt) Amount calculated in deferred tax note.
Current assets:
Prepaid expense
EQUITY & LIABILITIES:
Non-current liabilities:
Deferred tax (Cr)
Current liabilities:
Income received in advance Amount calculated in deferred tax note.
STATEMENT OF COMPREHENSIVE INCOME:
Profit before tax
(Income tax expense) 2
Profit after taxation
• IRIA – year received xx
- next year (xx)
• PE – year paid (xx)
- next year xx
WEAR AND TEAR CP x % No residual For the whole year
RECOUPMENT SP -TB TB = CP – W&T SP limited to CP
CAPITAL GAINS (SP – CP) x 80% …. X 20% - Tax recon
NOTES FOR THE STATEMENT OF FINACIAL POSITION:
1. INCOME TAX EXPENSE:
Main components of income tax:
Current tax expense
Deferred tax expense/(income)
(Deferred tax income relating to increase in tax rate end of the year)
Tax rate reconciliation
Accounting profit Profit before tax
Tax at the standard rate of 28% Profit x 0,28
Non-taxable income:
Profit on the disposal of equipment
(Dividends received)
(Capital gains) Rxx X 20% X 28% Amount x 0,28
Non-deductible expenses: tax penalty paid
(Tax allowance received)
Deferred tax expense relating to an increase in tax rate at the beginning of the year
(Deferred tax (income) relating to increase in tax rate end of the year)
Non-deductible fines
Non-deductible donations
Income tax expense
, 2. DEFERRED TAX:
Analysis of temporary differences:
Tax allowances on PPE
Prepaid expenses
(Income received in advance)
(Capital allowances)
(Tax loss)
(Provision for leave pay)
Deferred tax liability/(asset)
CALCULATIONS:
1. CURRENT TAX:
Profit/(loss) before taxation
Depreciation - acc
(Wear-and-tear – tax)
(Profit on disposal of equipment – acc)
Loss on disposal equipment - acc
Capital gain (80%) - tax
Recoupment of wear-and-tear - tax
Tax penalty paid - acc
(Tax allowance received – tax)
Insurance premiums paid in advance - tax
(Loss – prior year)
Fines
Donations
Provision for leave pay Previous year – current year
(Dividends received)
Taxable income/(loss)
Current taxation
2. DEFERRED TAX:
CP TB TD DT DT
Asset xx xx xx xx Cr
Prepaid Expense xx - xx xx Cr
IRIA (xx) - (xx) (xx) Dt
Loss 0 xx (xx) (xx) Dt
Insurance xx 0 xx xx Cr
Prov. for leave (xx) 0 (xx) (xx) Dt
Research 0 xx (xx) (xx)
Dt – deductible
If asset is sold it does not come in Deferred tax calculation.
Cr – taxable
