Cash flow – tax paid calculation when a tax refund is due

Hi John,

I hope you are well.

Could you help with my thinking with this one…

In MTQ 9 in Kaplan you have to calculate tax paid for the cash flow. The question states that there is a tax refund due as a result of making a loss. The details are:

Income tax liability b/f in sofp is 5000
Income tax recoverable in P&L is 500
Income tax recoverable (asset) in sofp is 500

Tax paid is 5000

I can see what they have done in the answer but can’t quite explain it in words if I was asked to describe what’s happening to someone else.

Could you help?

Thanks