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June 2010, Q2, note (v) Tax point

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › June 2010, Q2, note (v) Tax point

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by MikeLittle.
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  • June 2, 2016 at 3:01 pm #318888
    acca2050
    Participant
    • Topics: 41
    • Replies: 51
    • ☆☆

    June 2010, Q2, note (v) and in its answer income Statement preparation:

    Profit b/tax $28750
    Inc. Tax
    ($12000 – (1400 ** ) – 1800 ) = $8800 –

    Pf for year = $19 950

    ** Why this $1400 figure subtracted. Why not it is added as I have done almost all past papers and in most of papers it is added.

    Many Thanks

    June 3, 2016 at 5:58 am #318997
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    Put the figures into T accounts

    Deferred tax:

    debits: 1,800; 4,200
    credits: 6,000

    Current tax:

    debits: 12,000
    credits: 1,400: 1,800

    Therefore 8,800 is the tax charge in the statement of profit or loss

    You say “Why not it is added as I have done almost all past papers and in most of papers it is added”

    Two points arise from this!

    1) “Why not it is added as I have done almost all past papers ….”

    This suggests that you are doing your workings without really understanding the whys and wherefores of what you’re doing 🙁

    2) “and in most of papers it is added”

    You’ve just said yourself that sometimes the figure is not added, it’s subtracted

    The key is to note which side the figure is in the trial balance. Very often it’s on the debit side but, as in this case, it’s on the credit side

    June 3, 2016 at 9:17 am #319056
    acca2050
    Participant
    • Topics: 41
    • Replies: 51
    • ☆☆

    Prior to reading your response I figured out balances column on trial balance. For confirmation I doubled-check with your answer.

    Many Thanks

    June 4, 2016 at 4:32 am #319223
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    You’re welcome

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