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For example in a summarized company’s statement of profit or loss includes loan interest receivable and payable both.
plus in the question if they ask to start from operating profit, how would u account this?
interest receivable is always for not trading purposes so u deduct the amount from the operating profit, then after finding TATP add the same amount as interest income?
interest payable made for non trading purposes should be deducted from operating profit ryt?
if it was non trading then add to operating profit and subtract from interest income.. I almost scratched my hair for thisIntrest recieveable is not always for non trading purpose it’s also trading related , like is company is bank , intrest revieveable would be now ? Trading related now , dun go for craming
If it is trade related it’s allowable income , add in trading profit , if already added then no treatment and if it is non trading and already added in opertaing profit , deduct it from there and add it in the performa under intrest head , under loan relationship rule .If it is trading intrest payable allowable expense dedcut from profit
and if non trading then no treatment , and if it is non trading along with it is deducted from
op profit , add back and deduct from perfoma under loan relationship ruleIf its operating profit, interest is not accounted for and you dont have to deduct it. Only adjustment is in the TTP calculation. keep in mind, this is for non-trading related interest.
As Abdul has stated operating profit should be before including interest income and before deducting interest payable.
In calculating adjusted trading profit we do not include interest income and this will be separately shown as an interest income assessment (or to give it its proper name a Non Trading Loan Relationship (NTLR) assessment) on the Corporation Tax computation.
Interest payable however will need to be split between interest payable on trading loans which will be deducted in deriving adjusted trading profit and interest payable on non trading loans which is deducted from interest income.
Two main types of non trading loans would be loans taken out to buy shares or to buy an investment / rental property
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