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Hi Sir,
I’m confused as to the calculation of the deferred tax in the SOCI in Q2(a) of Dec 2012.
Specifically, in the SOCI, we need to determine the Income Tax Expense. The trial balance provided shows deferred tax having a credit balance of $1200.
The provision for deferred tax required for the year is $1000 ($5000 x 20%). Why is this $1000 deducted from provision b/f 1200 to arrive at $200 credit to the SOCI?
I would appreciate you can explain it in terms of T-accounts. Thank you!
Because we already have a credit balance of 1,200 brought forward and we only now need a provision of 1,000 to carry forward. That means we have expensed 200 in excess in years gone by, so now we can credit the income statement this year with the movement in the provision.
Is that clear?
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