Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Deferred taxation question no 1
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- February 25, 2017 at 3:53 pm #374171
The statements of financial position of Nedburg include the following extracts:
Statements of financial position as at 30 SeptemberNon-current liabilities
Deferred tax 310m(2002) 140m(2001)
Current liabilities
Taxation 130m(2002) 160m(2001)
The tax charge in the statement of profit or loss for the year ended 30 September 20X2 is $270 million.
What amount of tax was paid during the year to 30 September 20X2?Sir! I guess like most deferred taxation questions this question is difficult to understand .I need some explanation.
ThanksFebruary 25, 2017 at 7:53 pm #374227“I guess like most deferred taxation questions this question is difficult to understand .I need some explanation.”
You are SO wrong!
If you can get on top of this topic, it literally becomes a mindless routine as simple as breathing!
Open 2 T accounts, 1 for deferred tax and 1 for current tax
Put in the brought forward figures – beware that you get them on the correct side (debit or credit as per the question)
In Nedburg’s case, put in the carry forward amounts
Normally you would be asked for the charge to the statement of profit or loss but for Nedburg we are given this figure and instead we have to find the cash paid
The routine is pretty much the same for both
In the current tax account, put in the charge to the statement of profit or loss figure
Balance off the deferred tax account and double enter the balancing figure to the current tax account
Balance off the current tax account and the missing figure (normally the charge to the statement of profit or loss) is, in Nedburg’s case, the figure for cash paid
Here’s the detail:
In the deferred tax account
Debit side:
310 carried forward
Credit side
140 brought forward
170 balancing figureIn the current tax account
Debit side
170 double entered from the deferred tax account
130 carried forwardCredit side
160 brought forward
270 charge to the statement of profit or lossTherefore the balancing figure on the debit side of the current account is 130
Follow these basic principles – it really is straight forward
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