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In bpp course notes chapter 6 example 1(a)(I) answer how did deferred tax arise as 3.6×2/6@30% is there any formula n how come 2/6 came is it profit upon selling price. Please help I am doing self study .
Let me give you a formula for income tax in the F7 exam.
Current Tax (Profit X30%)………………… XXXX…………………… SOFP (CL)
Over Provision….(+)………………………………(XXX)
Under provision. (-)………………………………. XXX
Increase in DT….(+)………………………………..XXX W1
Decrease in DT…(-)……………………………….(XXX) W1
Tax Payable……………………………………………………. XXXXX………………… SOP/L& OCIAnalysis of Deferred Tax W1
DT b/dwn…………………………………………………………………………………….XXXX
Increase in DT……………………………………………….W1…XX…….To IS
Decrease in DT……………………………………………..W1..(XX)……To IS
DT C/fwd (TDX30%)……………………………………………………………………XXXX……………..SOFP..(NCL)DT…….Deferred Tax, TD… Temporary Difference, 30%……Rate of Tax
TD= CA-TB
Where CA (Carrying Amount ) = Cost – Acc. Depreciation
TB (Tax Bax) = Cost – Acc. Capital Allowances.I think that helps
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