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hey,
i was going through the differences between shares and debentures,
it says that ordinary/preference shares are not a tax allowable expenditure and debentures are not.
can you tell me what is a tax allowable expenditure…and how does that apply above?also, according to the marks allotted for each question, what is a minimum that i should write?
like for 2 marks how many lines…..for 10 marks how many paragraphs…?thankyou!
10 marks, 10 paragraphs – but they can only therefore be very short paragraphs – no more than three lines! Effectively, 1 sentence. and leave a line between your paragraphs.
Debenture interest is a finance charge in the income statement and is tax allowable ( your question has an extra “not” in it. Dividends are appropriations of after-tax profits. I know, pref divs are shown as a finance charge, but that is merely a presentation point – the pref shares are an obligation ( unlike the equity shares which are …. equity ) so pref divs are shown as an expense, but, as stated above, it’s a presentation point
thankyou,
but i still dont primarily understand what you mean by “tax allowable expenditure”? can you define that term please?It’s expenditure which the taxman allows you to claim as an expense against your profits. Some money ( and even expenses which don’t involve the outflow of cash – like depreciation ) are not allowed by the taxman to be claimed as expenses against your profits. Those which he disallows are non-deductible or non-allowable expenses.
Loan interest IS tax allowable, but dividends are not
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