In the Lease Vs Buy , Example 3, Sir have said
If the cash flow starts in 1st day of accounting period, then tax effect is at time 2
If the cash flow starts in last day of accounting period, then tax effect is at time 1
Very confusing, where can i refer more, please clear this anyone
Ask the Tutor ACCA FM
Delay in Tax
7y ago#1Tax is calculated at the end of the account period, and so if the payment is on the first day of the accounting period (time 0) then the tax is calculated at the end of the period (time 1) and if there is a one year delay then the tax is payable at time 2.
If, on the other hand, the payment is on the last day of an accounting period (time 0), then the tax is calculated immediately (time 0) and if there is a one year delay then the tax is payable at time 1.
This is all explained in my free lectures on both investment appraisal with tax, and the lectures on lease v buy.
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