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And how to understand the comment on answer sheet for this point: Pinto should be aware that the tax reversal position will creat an estimated total incremental outflow of 210,000 in the next period.
if I prepare a T a.c., what’s the label for it to put all provision/deffered tax, tax asset in this T a.c.? Thanks.
Hi,
Prepare a T-a/c named Income Tax payable a/c. Since, we dont have details of income tax expense, bring both deferred tax & current tax under this account. Balancing figure will be Income tax refund (cash received).Are you sure that we don’t have the information of the Statement of Income tax expense?
qn gives “income tax expense” in the SoCI. Its components are not given. If the components, ie, current tax, deferred tax and under/over-provision, were given, we could prepare two different accounts.
This is what i meant. Plz correct me if i am wrong.You will never be given the component elements of the tax expense. The movement in the deferred tax provision is to be treated as part of the year’s tax expense. And even if you WERE given that information, you would simply credit the T account with both the current tax element AND the deferred tax element.
Basically, open a T account for tax, put in both brought forward figures ( deferred AND current ) put in both the carried forward figures. Put in the tax expense from the Income Statement.
The missing figure is the cash movement – normally cash paid …. but he asked a question recently where there was a tax repayment
1)My T a.c. as below for above question ( bold means right side figures as I cant add a vertical line into this T type. Sorry)
Tax Payable
Left: Right:
b/f tax assets 50 b/f provision –
c/f deferred 50 I/S charge 160
c/f provision 150 b/f deferred 30
closing bal. 60 tax refund
Is that Right?2)June 2010 Q3-Deltoid
in SoFP, Tax refund due 500 for this year, where I should put it? And still cant understand thoroughly the right or left bal for tax payable T a.c.1) 60 is not the closing balance, it is the balancing figure. opening & closing balances are given in the question. if the debit & credit side is not balancing, smthng must be missing. usually, we find smthng missing on the debit side and that is tax paid. why is it tax paid? see the entry:
Dr. Tax a/c
Cr. Cash
(tax paid)in this qn, we find that smthng is missing on the credit side. then, it is tax refund. entry:
Dr. Cash
Cr. Tax a/c
(cash received)2) 500 is the closing balance for this yr. here, it is tax refund – an asset and thus debit balance. this will be shown on the credit side of the account as closing balance.
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