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Hi Mike,
When preparing the balance sheet for non-current assets, the ACCA list the tax refund due as $2400.
In the question there is a tax refund fo $2400 for the year ended 31 March 2012 but also there is a current tax entry of $800 (debit) for the under/over provision of tax liability for the year ended 31 March 2011. Please could you tell me why the $800 is not used in any calculations to prepare the balance sheet for 31 Mach 2012?
Thank you,
Stu
Hi Stu – have you followed the workings in the videos? It should be a series of 4 or 5 straight-forward steps. The 800 brought forward will disappear in the calculation of this year’s tax charge and in the calculation involved in the balancing of the deferred tax account when the “missing” figure in deferred tax is transferred to the current tax account
Hi Mike, I’ve watched the video but I think it focuses on the income statement?
I think your answer above refers to the income statement calculation of current tax?:
2400 + 200 (change in deferred tax) – 800 (under provision of tax from previous year)But the statement of financial position just shows a value of 2400 for the current tax. I am wondering why the previous year’s under/over provision of tax has no effect on the current tax on the statement of financial position?
If you were to draw a T Account, what figure would you carry forward into the next year as the Current Tax liability. I presume the question says something like “the directors have estimated the tax liability for the year to be …” or ” the provision required for Current Tax is …..”
….and I’m assuming that either way indicates an amount of $2,400.
So, what figure do you put on the Statement of Financial Position? $2,400!
It says “Fresco’s income tax calculation for the year ended 31 March 2012 shows a tax refund of $2.4 million”
so I assume the 800 under provision from last year is relevent to this year’s income tax calculation but has already been included as part of the $2.4 million, so I don’t make any adjustments? is this correct?
Edit – sorry I think my answer above is wrong because the income statement is showing the $800 and $2.4 million seperately.
sorry I’ll try that again – the 800 under provision has been reflected in the income statement and persumably has been paid in the current year (or absorbed into “deferred tax”?) leaving no seperate liability on the balance sheet? is this correct?
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