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Hi
In the Sep’16 paper on the ACCA site , for qn 31. I have not understood the working for deferred tax. Please help me !!Open 2 T accounts, 1 for DT and 1 for CT
DT debit side
8,400 balance carried forward
DT credit side
2,500 balance brought forward (per question)
6,400 dt on reval of 32,000 + dt on 10,000 other balances (per question)
500 missing balancing amount debit to DT and credit to CT
CT debit side
2,400 provision for tax on this year’s profits (per question)
CT credit side
1,100 balance brought forward
500 transfer from DT account
800 charge to statement of profit or loss
I’m amazed that anyone can get confused with this type of exercise. I highly recommend that you try the mini-exercises towards the end oof the free F7 course notes – all the tax exercises are from past exam questions and they were ALL worth 4 or 5 marks
You cannot afford to get these wrong and they are so EASY!!!
Thanks for the reply sir.
But the values do not match with the question.
Sep 2016 Triage Co.Well this is the answer to the question 31 from the September 2016 F7 exam:
“Specimen Exam applicable from September 2016” is the heading on the front page and the address is:
https://www.accaglobal.com/content/dam/acca/global/PDF-students/acca/f7/specimen/F7-specimen-s16.pdf
So now you decide to give me another clue – the name of the question!
Would that have been a good idea originally?
Ok, here we go again – but it’s the same answer – just different amounts:
Open 2 T accounts, 1 for DT and 1 for CT
DT debit side
3,960 balance carried forward (20% x (7,800 + 12,000))
DT credit side
3,200 balance brought forward (per question)
1,560 dt on reval of 7,800
800 missing balancing amount debit to DT and credit to CT
CT debit side
700 balance brought forward (per question)
2,700 provision for tax on this year’s profits (per question)
CT credit side
1,100 balance brought forward
800 transfer from DT account
2,600 charge to statement of profit or loss
OK?
Hello sir,
I want to ask where did you get the 7800 for balance carried forward? are you taking the amount from revaluation gain?
But the amount of 1560 you take from revaluation gain too right?
Yes, this is the amount of the gain and the 1,560 is the tax upon it that will also be recognised through other comprehensive income.
Thanks
Why you need to use amount 7800 for two times? First you debit (20% x (7,800 + 12,000)) and then you debit (7800 x 20% = 1560) . I’m not quite understand
Deferred tax
Provision required at 31 March 20X6:
Revalued property and other assets (7,800 + 12,000) x 20%) 3,960
Provision at 1 April 20X5 (3,200)
–––––––
Increase in provision 760
Revaluation of land and buildings (7,800 x 20%) (1,560)
–––––––
Balance credited to profit or loss (800) –––––––Here is my question. First you calculate (7,800 + 12,000) x 20%), and then the same amount again used (7,800 x 20%). Why you need to calculate revaluation twice?
Hi,
So, what they are doing is to look at the overall movement in the deferred tax balance of 760. However, part of this movement is due to the revaluation of the PPE, and the deferred tax element of this will go through OCI and not profit or loss. To work out how much goes through OCI they look at the tax on the revaluation and remove this from the movement. The remainder of the movement will then go through profit or loss.
It might help if we go back to first principles using debits and credits
CR Deferred tax (increase) 760
DR Tax (revaluation = 1,560 x 20%) 1,560
CR Tax (profit or loss = balancing figure) 800Thanks
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