Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Preparing financial statements
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- July 25, 2024 at 1:42 am #708835
In the trial balance of SPQ Co, there is a credit balance of $900 on the tax liability account, an amount remaining after the settlement of the previous year’s liability.
The amount payable for the current year has been estimated at $27,400.
What amount should be shown as income tax in the statement of profit or loss?
The correct answer is $26,500.my answer is 28300 becasue i though last year there was an underprovision.
if there is a credit balance of 900 on tax liability account doesn’t it mean that we estimated a lower tax expense last year and it was actually higher since there is a credit closing balance in the liability account. if we estimated it higher than it actually was then shouldn’t there be a debit closing balance on the tax liability account? Pls help me out with this debit and credit confusion.July 25, 2024 at 10:29 am #708839The fact that they had a credit balance means that they were showing as still owing tax. However they didn’t owe anything because the liability has been settled. Therefore they had over-provided and the 900 is subtracted from this years liability.
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