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COY Taxable total profits.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › COY Taxable total profits.

  • This topic has 2 replies, 2 voices, and was last updated 10 months ago by SukainaKamar.
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  • Author
    Posts
  • March 20, 2022 at 8:07 pm #651563
    SukainaKamar
    Participant
    • Topics: 20
    • Replies: 20
    • ☆

    Qn) Kaplan FA21 study text
    The profit before tax of Smith Ltd per the statement of profit or loss for
    the year ended 31 December 2021, is £105,940, which includes:
    £
    Depreciation 9,750
    Loan note interest payable (on trade related loan) 12,760
    Bank interest payable 6,590
    Bank interest receivable 15,860
    Notes:
    1 Bank interest receivable includes an accrual of £2,340 as at
    31 December 2021 and £1,210, as at 31 December 2020. There
    were no accruals in respect of the loan note or bank interest
    payable at either the beginning or the end of the year.
    2 The bank interest is payable on a loan to purchase an investment
    property, which is a non-trade related loan.
    3 The company’s capital allowances for the year are £11,800.
    Calculate Smith Ltd’s taxable total profits for the year ended
    31 December 2021, clearly showing the different types of income.

    Answer
    Smith Ltd – Taxable total profits – y/e 31 December 2021
    £ £ £
    Profit per accounts 105,940
    Non-trading interest payable 6,590
    Depreciation 9,750
    Non-trading interest receivable 15,860
    Capital allowances 11,800
    –––––– ––––––
    122,280 27,660
    (27,660) ––––––
    –––––– _______
    Tax adjusted trading profit 94,620
    ———–
    Interest income:
    Non-trading interest
    receivable
    15,860
    Non-trading interest payable (6,590)
    _______
    9,270
    ————
    TTP 103,890

    Problem,
    Hello sir, i wanted to ask why we dont less 1210 from Bank interest receivable when calculating the Interest income?
    As this is an accrual income relating to year end 2020, While these calculations are made for year end 2021.

    Kindly,
    Sukaina

    March 21, 2022 at 1:56 pm #651590
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    This is actually an issue about interpreting the wording within the question – the question states the interest receivable “includes” the accrual at both the beginning and end of the accounting period- this means that the receivable figure given in the question has already correctly accounted for both the opening and the closing accrual – last year’s closing accrual has been reversed at the start of this period ie. the opening accrual has correctly already been deducted in getting the given figure of interest receivable.

    March 21, 2022 at 7:17 pm #651602
    SukainaKamar
    Participant
    • Topics: 20
    • Replies: 20
    • ☆

    I get it now, Thank You sir.

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