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interest before tax

Wwahab1114y ago
hi , advantage of debenture for a company is that, "interest is chargeable against profit before tax"
disadvantage of debenture for a company is that ,"interest must be paid out of pre-tax profits .
Please explain both.
MikeLittleMikeLittleTutor14y ago#1
In simple words ..... interest is an annual expense for a company. It is a pre-tax expense within the Statement of Income, and it HAS to be paid / accrued as a period expense.

This is in contrast to a dividend which is NOT an expense. A dividend is an appropriation of after-tax profits.

So, if a company has no distributable profits available, it is not able to declare a dividend. However, if it has any loans of debentures outstanding, it MUST account for the interest. Even if a pre-interest, pre-tax loss has been sustained, the company must nevertheless increase that loss by accruing for any unpaid period interest
Bbacni14y ago#2
i tried to find what it that "pilot paper" ... are this expression to some subject for exam ... where can i find it? or what is that, pls? it's something special ..:))

thnx
MikeLittleMikeLittleTutor14y ago#3
It's on the ACCA's website, under "ACCA", "F4", "past exams", "pilot"

Couldn't be easier really!
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