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Hi Mike… At the back of the notes for F7, there is this question
Question 11
Extracts from trial balance at 31 March, 2012
Current tax debit balance 800
Deferred tax liability 3,200The company’s income tax calculation for the year ended 31 March, 2012 shows a tax refund of $2·4 million. The balance on current tax in the trial balance represents the under/over provision of the tax liability for the year ended 31 March 2011. At 31 March, 2012, the company had taxable temporary differences of $12 million (requiring a deferred tax liability). The income tax rate is 25%.
I understand from the answer that the DT account would look like…. DR 3000 & 200, CR 3200.
Why 3000 would go on the DR side? Because the question says that the temporary ifferences of 12m x .25 (3m) require a DT Liability (ie, if it´s a liability it would go on the Credit side?)
Thanks
Ismael
Do you mind if I’m really brutal here?
The narrative for that $3,000 on the debit side is “Balance carried down” and it’s carried down in the same T account to appear below the total line on the credit side of the account with the narrative of “Balance brought down” and …
… there it is! On the credit side! Looking exactly like a liability!!!
Let me take a wild guess now. Let me guess that you were exempt from taking the F3 examination
Because, if you in fact DID take the F3 exam, it appears that you have forgotten one of the most basic entries in double entry bookkeeping
Go back to watch John’s F3 lectures and particularly the lecture on “Balancing the accounts”
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