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current tax 1400? deferred tax 6000?provison for income tax for the year 12000, at year end the tax base was 14000 less than carrying amount the tax rate is 30%
when work on income tax expence ,12000 – 1400?overprovision?-1800 ,why do we subtract 1400 how to tell it is overprovisionWhen you are doing business for example, you are required to file a provisional return to the Revenue department. This provisional return is based on estimates. For Example, when you expect to make US$ 200,000 as profit for your business, you pay Revenue 200,000 X30%= 60,000. Now at the end of the accounting period you make a profit of US$150,000, the tax which you pay is 150,000 X30%=45,000. This means that there was an over provision of 15,000 (60,000-45,000) . This 15,000 is supposed to refunded by the Revenue department. Similarly if you expect to make a profit of 200,000 as above, the provisional tax you pay is 60,000 (200,000X30%) but at the end of the accounting period you make a profit of say 250,000 then the tax to pay is 75,000 (250,000X30%). This means there was an under provision of 15,000 (60,000-75,000). This amount you are supposed to pay it to the Revenue department.
So for the tax payable to revenue department is computed as.
Current Tax (profit x Rate of Tax)……………………………..XXXXX
Add. Under provision………………………………………………..XXX
Less. Over provision……………………………………………….(XXX)
Tax Payable………………………………………………………………………..XXXXX ….To SOP/L & CI
Hope this helps.Hi @beyagala thank you soooo much for helping, this topic was very pain for me until I found this post, Now it become very easy for me to compute deffered tax and to put it rightly into financial statements………God bless you and may you live a very happy life (Ameen)
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