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Sir these are some statements which I have in my personal notes when studying f9
Could you please tell me whether are these statements correct
Thank you
Tax is on buying the asset and tax savings is the expense which you have done for buying the machine is for business purpose and is thus and allowable expense on which you will have tax savings and capital allowance and this allowance can be in reducing balance or straight line that is why we have tax and tax savings
Depreciation is the normal reduction in value which is deducted from cash flow and tax allowable dep or capital allowance is depreciation×tax rate which can be added to the cash flow after tax as tax savings.
Tax allowable depreciation and capital allowances pretty much same thing. This is approved depreciation calculated under tax bases
Tax allowable depreciation often this term us used when business is allowed to deduct from its tax liabilities
Depreciation is the asset use deductible depreciated each year
“Tax is on buying the asset and tax savings is the expense which you have done for buying the machine is for business purpose and is thus and allowable expense on which you will have tax savings and capital allowance and this allowance can be in reducing balance or straight line that is why we have tax and tax savings”
The tax allowable depreciation (or capital allowances) is allowable for tax and results in a tax saving. (It is not the same as the financial accounts depreciation which is ignored if mentioned because it is not a cash flow). The tax allowable depreciation in the exam is usually reducing balance, but the question will always state the method.
“Depreciation is the normal reduction in value which is deducted from cash flow and tax allowable dep or capital allowance is depreciation×tax rate which can be added to the cash flow after tax as tax savings.”
Financial accounting depreciation is irrelevant (as stated above). The tax allowable depreciation gives rise to tax savings.
“Tax allowable depreciation and capital allowances pretty much same thing. This is approved depreciation calculated under tax bases.”
They are two different names for exactly the same thing.
Have you watched my free lectures on investment appraisal with tax, because the rules are all explained there?
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