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  1. I have not understood Q3 , opening balance is : 2,600,000 ( credit ) , ending balance is : 6,750,000 ( credit ) , so it means 4,150,000 go to expense ? result should be ( 19,400,000-800,000 ) + 4,150,000 = 22,750,000 ?

    Thanks

    • I struggled with this questions too, and i can see this comment is from 2021, but i will answer incase anyone else is curious.

      It is because $3,750,000 of the balance in the closing deferred tax is attributable to an asset which was revalued. The deferred tax on revaluations of assets is shown in the OCI, and not appart of P/L. So the double entry for this would’ve been Dr OCI CR Defferred Tax.

      The question is after the expense in the P/L, so we will deduct this $3,750,000 from the closing tax.

  3. Dear Tutor

    Hi I really don’t understand all these 5 questions from these quiz – would be nice to see the video dedicated to one of them at least as an example. I am really struggling – I watched your video on T accounts in FR, and it’s clear but these 5 questions are really “killing” my brain:(((
    Are all of those solved through T accounts? Can you please explain one of those 5 in a lot of details?

    Thank you

    Katya

  8. Hello,

    I’d like to ask about the solution to question 4 in the above Practice Questions on Income taxes. All the entries are clear for me except one. In the answer there is 60 current tax debit – why is it debit and not credit? I suppose that 60 on current tax a/c represents a movement from Deferred tax a/c “transfered” to Current Tax a/c to arrive at the tax paid. But, the balance on deferred tax a/c has actually increased (and not decreased) by 60 so there is 60 more credit on deferred tax a/c – shouldn’t it therefore be also a credit on current tax acc if we “transfer” it?

    Please let me know where I am wrong. Thank you in advance.

    • If you draw t-accounts you will understand it
      as the Opening balances of CT & DT on the credit side of t-accounts, i.e. $360+150. The charge to SOPL will be on credit side of t-account i.e. 280. Now add these up.
      the Closing balances will be on Debit side of it i.e.$420+$170 , now add these up.
      the Balancing figure will be on the debit side of the T-account and that will be $200.

  9. OK Autumn, now we’re getting somewhere!

    However, what you have now sent is a complete record of the answer (maybe!)

    Does your original question still apply? You asked “why does the tax expense for the current year appear as a Dr and not as a Cr in the Current Tax Account?”

    According to your most recent post, the only debits in the Current Tax Account are the brought forward and carried forward figures (2,450 and 7,130)

    I’m not at all convinced that you have correctly copied from an answer – I’m more inclined to believe that what you have posted is your own effort at answering this question! Am I correct?

    The crucial point in this question is in the line “Tax liability for the current year has been estimated at 8,470”

    You need to be aware that there is a BIG difference between the expressions “tax liability” and “tax charge” (also referred to sometimes as “tax expense”)

    The tax liability is the figure that appears BELOW the total lines of a T Account and, being a liability, it’s on the credit side below the lines with the narrative “Brought down”

    That being so, there must be a corresponding entry for the same amount on the debit side ABOVE the total lines with the narrative “Carried down”

    The “Tax expense” / “Tax charge” is the amount that is double entered as a debit in the Statement of Income and a credit in the Current Tax T Account and is the figure that is calculated following the tax rules that are explained in detail in the lectures on this site for the Tax Paper (formerly known as F6)

    IF you have copied the answer correctly, then the question should have read “The tax EXPENSE for the current year has been estimated …” and, in that case, your post is correct.

    But that then is not consistent with your original question “Why is the tax liability shown as a debit?” because, according to your post, it isn’t!

    IF the post is your effort, and if you have correctly replicated the question, the entries in the two T accounts for Deferred Tax and for Current Tax should be as follows:

    Deferred tax

    Current Tax (balancing figure) 1,110
    Carried forward (per question) 2,100

    Deferred Tax credits

    Brought forward (per question) 3,210

    Current Tax debits

    Brought forward (per question) 2,450
    Carried forward (per question) 8,470

    Current Tax credits

    From balancing figure in Deferred Tax 1,110
    Tax charge to Statement of Income (balancing figure) 9,810

    NOW we see the tax liability on the debit side of the Current Tax Account being carried forward onto the credit side

    Is that any better?

    PS I hadn’t realized that this was a quiz question from the end of the chapter – if I had realized I could have saved you a lot of trouble typing it all out. Sorry!

  10. Hi,

    I think that I have got a bit confused. Please could anyone explain why the tax expense for the current year appears as a Dr rather than a Cr in the current tax T account

    I have placed my workings below;

    Tax Expense Current Tax Deferred Tax
    ___________________________________ __________________________ __________________________
    Dr Cr Dr Cr Dr Cr

    Current Yr ex 8470 Bal. b/f 2450 Bal. b/f 3210
    Current Yr Ex 8470 DTL(W1) 1110
    DTL (W1) 1110

    Bal. c/f 7130 Bal. c/f 2100
    _____ ______ _____ _____
    9580 9580 3210 3210

    W1.

    Temporary Difference = 7000

    7000*0.3 = 2,100

    Closing Deferred Tax Liability 2100
    Opening Deferred Tax Liability (3210)
    _____
    (1100)

    • This is very difficult to work out which figures fit into which accounts

      Please retype withCurrent Tax Account debits

      Then Current Tax Account credits

      Then Deferred Tax Account debits

      Followed by Deferred Tax Account credits

      In addition, please give the information about the tax charge for the year (from the question) and any other information that there is in the question relating to tax

      THEN I can maybe help you

      OK?

      • Hi,

        Please accept my apologies, the previous workings did not send as intended. This question relates to question 1.

        Information from Question:
        trial Dr balance on Current Tax account 2,450
        trial Cr balance on Deferred Tax account 3,210

        Tax liability for the current year has been estimated at 8,470
        Net assets have a carrying value of 7,000 greater than their tax base
        Corporate Income tax rate is 30%

        Current Tax account debits
        Bal. b/f 2450
        Bal. c/f 7130

        Current Tax account credits
        Current Year Tax Expense 8470
        Deferred Tax Liability (W1) 1110

        Defferred Tax Account Debits
        Deferred Tax Liability (W1) 1110
        Bal. c/f 2100

        Deferred Tax Credits
        Bal. b/f 3120

        Tax Expense Debits
        Current Year Tax Expense 8470
        W1.

        Temporary Difference = 7000

        7000*0.3 = 2,100

        Closing Deferred Tax Liability 2100
        Opening Deferred Tax Liability (3210)
        Deferred Tax Moevement (1100)

        Thank you for your help in advance, it is much appreciated.

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