Income tax
Income tax is tax based on taxable profits under the relevant jurisdiction’s rules. FA financial statements recognise the period’s income tax expense and any amount payable or recoverable, including adjustments for previous estimates where given. Taxable profit can differ from accounting profit. Detailed tax computations and deferred tax require separate coverage beyond the basic FA treatment.
Worked example
An estimated current-year tax charge of $8,000 creates tax expense and a tax liability; paying $6,000 on account leaves $2,000 payable, before other adjustments.
Common mistake
Sales tax collected from customers is not the company’s income tax expense, and an unpaid tax charge is not automatically equal to total tax expense.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| FIA | FFA | Direct | September 2026–June 2027 |