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1. Is it true that sole traders pay income taxes on profit before tax figures once the interest and other expenses are deducted?
2. Is it also true that limited companies pay corporate taxes on profit before interest amounts similarly once all other expenses plus interest are deducted?
3. Is it true that operating expenses are those expenses that are not related to our cost of core business production or products but rather considered other expenses which are paid for various expenses such as electricity, rent, insurance, depreciation etc. They are also called day-to-day expenses which are used to run the daily business operations that are not related to our business production at all?
4. Is it true that operating incomes are those incomes that are not related to our sales of main production but rather considered other incomes coming from various sources like rent, interest, etc. They are also called day-to-day incomes which are used to run our daily business operations that are related to our non-production activities?
5. Is it true that a dividend is paid only when it is declared by the shareholders in AGM or GM and a dividend will be minus from the net profits figures but the profit we get after deducting the dividend is called what? (Profit for the year?)
1. Sole traders pay income tax on all of their income which includes the profit from the business. They add up all of their income (profit from the business plus (for example) dividends and interest that they might have received) and pay tax on the total. The business itself pays no tax.
2. Limited companies are a separate entity and they pay corporation tax that is calculated on the profit of the company.
3 and 4. No. Operating income is all income from their operations (which is. the income from their main business), and operating expenses are all expenses incurred in earning that income.
5. Dividends do not reduce the profit. They appear in the Statement of Changes in Equity and reduce the amount of the Retained Earnings, which is owed to the shareholders.
All of this is explained in full in my free lectures. Have you watched all of the lectures?
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