Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Deferred taxation question no 2
- This topic has 2 replies, 2 voices, and was last updated 7 years ago by MikeLittle.
- AuthorPosts
- February 26, 2017 at 4:22 pm #374172
The trial balance of Highwood at 31 March 20X6 showed credit balances of $800,000 on current tax and $2.6 million on deferred tax. A property was revalued during the year giving rise to deferred tax of $3.75 million.
This has been included in the deferred tax provision of $6.75 million at 31 March 20X6.
The income tax charge for the year ended 31 March 20X6 is estimated at $19.4 million.
What will be shown as the income tax charge in the statement of profit or loss of Highwood at 31 March 20X6?Sir! explanation needed on this one.
February 27, 2017 at 12:52 am #374430bump
February 27, 2017 at 7:46 am #374475Here’s what I responded to your similar question a couple of days ago!
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 this case, you can also put in the carry forward amounts
In the deferred tax account we are told that, of the $6,750 liability to carry forward, $3,750 relates to the revaluatin so we need to transfer that from deferred tax account to revaluation reserve
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 is the charge for the year to be debited to the statement of profit or loss
Here’s the detail:
In the deferred tax account
Debit side:
6,750 carried forward
Credit side
2,600 brought forward
3,750 transfer to revaluation reserve
400 balancing figure double entered to current tax accountIn the current tax account
Debit side
400 double entered from the deferred tax account
19,400 carried forwardCredit side
800 brought forward
19,000 charge to the statement of profit or lossFollow these basic principles – it really is straight forward!
I really hope that you are in fact writing out these T accounts as I take you through them, step by step!
- AuthorPosts
- The topic ‘Deferred taxation question no 2’ is closed to new replies.