The opening balance is the balance remaining after having looked at the prior year estimate and the payment made this year.
If we have an opening credit it is because the amount paid is less than the prior year estimate, thus leaving us with an additional credit to profit or loss which reduces this year's tax expense. In effect we provided too much in the prior year and so reduce this year's tax charge.
Thanks
N
Njabulo·
Hi sir.I am a little bit lost,you said we must ignore that 500 as an over or under payament and just Focus on that it is a opening debit and credit,and later you said that 500 dollars was over provision,or how do you know that we over provided because we just have a o/p balance with no estimate as yet?
The opening balance is the balance remaining after having looked at the prior year estimate and the payment made this year.
If we have an opening credit it is because the amount paid is less than the prior year estimate, thus leaving us with an additional credit to profit or loss which reduces this year's tax expense. In effect we provided too much in the prior year and so reduce this year's tax charge.
Thanks