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I am currently unsure about “tax provision” as well as “debit balance of current tax brought forward” . I cant find information on this part in F7 lecture notes since they mainly focus on deffered tax. Can someone tell me what is “debit balance of current tax brought forward”?
At each reporting date you would generally expect to see a current liability in respect of the current year’s tax liability (provision). The amount of this will depend on the tax computation. The amount of tax paid to the tax authority may be more – e.g. because the tax authority disallows some expenditure that has been claimed – or it could be less. For FR you do not have to know why there is a difference – only that if the liability is under-provided – that will leave a debit balance on the current tax payable account. This short-fall will become part of the next year’s expense.
Dear Tutor, may I ask what are the book entries before, and after the inspector of taxes agrees the tax liability for the year? (Assume that tax liability calculated internally is 6,000 and the inspector ‘s figure is 6,600.
Before:
DR Tax paid (P/L) 6,000
CR Corporation tax (SOFP) 6,000After:
DR tax payable (P/L) 600
CR Deferred tax (SPFP) 600 (=> Underprovision)Thanks for your time.
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