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Hello Sir,
Thanks for the clarification in your previous response. It’s most certainly the wrong way round in my notes. I downloaded them a month or so ago (can’t remember exactly).
Also sir In Q10 in the same exercises- the 2700 balance already includes the 2400 revaluation surplus on the Leased property?
If so, is that because the revaluation happened right at the beginning of the year?
That’s the only way the transfer of 1800 to C tax and of 26100 to P/l makes sense.
I found this tricky Also due to the bit that says the 15million CV and tax base difference excludes the earlier Revaluation.Your clarification would be much appreciated.
Thanks
“Also sir In Q10 in the same exercises – the 2700 balance already includes the 2400 revaluation surplus on the Leased property?”
No, that’s an incorrect interpretation
That 2,400 tax on the revaluation (so far not accounted for) is dealt with as follows:
– we need to increase the carry forward deferred tax liability by that amount
– but, without any further adjustment, that would increase the transferred balance from DT to CT by that same amount resulting in a further increase in the tax charge to the statement of profit or loss … and that would not be ‘fair’ on this year’s profits
– since this amount of 2,400 represents the deferred tax on the revaluation, we need to credit deferred tax account and debit the revaluation reserve
If you put those figures into your two T accounts, I believe that it should now make more sense
Thanks for pointing out the error in answer 5 – but I can’t imagine how or when that happened because, according to my (long ago) downloaded notes the answer is correctly shown
Thanks again
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