IAS 12 taxes

Open 2 T accounts

Piut in the balances that are given in the question – typically the opening balances and you’ll find them in the trial balance (beware the debits and credits – if it’s a debit figure in the trial balance, it’s a debit figure in the T account with a narrative “brought forward”)

Put in the carry forward figure of “the directors estimated the current tax liability to be $xxxx” – it goes in the debit side of the T account with a narrative of “carried forward”

(If the question tells you the “charge for the year for current taxation” that’s the figure that appears in the statement of profit or loss as an expense and appears in the current tax T account on the credit side – but that would be unusual … normally you would have to calculate the tax charge for the year so follow these ensuing instructions

A question will often say “the carrying value of the assets exceeds their tax written down value by $XXX” and will somewhere tell you the current rate of taxation

Apply that rate to the timing differences (carrying value – tax written down value) and you have the carry forward liability for the deferred tax T account (show on the debit side with a narrative “carried forward”)

Balance off the deferred tax T account (there may be an entry to put in where you need to credit the deferred tax T account and debit the Revaluation Reserve, but not always!) and double enter that balancing figure to the Current Tax T account

Balance off the Current Tax T account and that’s the tax charge for the year

Try that and particularly try the mini-exercises that you’ll find towards the end of the F7 course notes

OK?

You’re welcome