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this is the qnn from kaplan text
The profit before tax of Smith Ltd per the statement of profit or loss for
the year ended 31 December 2022, is £105,940, which includes:
£Depreciation
Loan note interest payable (on trade related loan)
Bank interest payable
Bank interest receivable
Notes:
1 Bank interest receivable includes an accrual of £2,340 as at
31 December 2022 and £1,210, as at 31 December 2021. There
were no accruals in respect of the loan note or bank interest
payable at either the beginning or the end of the year.
2 The bank interest is payable on a loan to purchase an investment
property, which is a non-trade related loan.
3 The company’s capital allowances for the year are £11,800.
Calculate Smith Ltd’s taxable total profits for the year endedhere my doubt is the int accrued as on 31 dec 2021 would be falling in acctng yr ended 2021 right. so y r we not deducting that 1210 amt from bank int receivables?
When you do an adjustment to profit, all you’re doing with disallowed expenses/non trade income is reversing what’s been done in the P&L, so the amount that’s been deducted or added in the P&L is added back/deducted in an adjustment to profit. This amount may be on the PAID/RECEIVED basis.
In the CT comp, the non-trade loan relationship (NTLR) figure is calculated on the ACCRUALS basis, so the amount that you include under this heading may be different to the amount you adjusted for in the adjustment to profits calculation.
You haven’t told me what the bank interest received figure was in the question, so let’s pretend it was £20,000, so you would deduct the £20,000 in the adjustment to profits calculation.
So in the example above, in relation to the bank interest received, as this includes an amount of £1,210 which relates to the previous year (2021) and which has already been taxed in 2021 but not received until 2022, this needs to be deducted from the £20,000 received. As the amount of £2,340 relates to this year (2022) but hasn’t been received yet, this needs to be added to find the total amount on the ACCRUALS basis for 2022, which would be £(20,000 – 1,210 + 2,340) = £21,130 (NTLR income).
bank int receivabe is 15860.
Interest income:
Non-trading interest
receivable 15860
Non-trading interest payable (6590)
=9270this is the calculation they did for int income. they did not deduct 1210
On re-reading your original post:
‘Bank interest receivable includes an accrual of £2,340 as at
31 December 2022 and £1,210, as at 31 December 2021’It appears that any accruals have been correctly dealt with already, so the only adjustment to make is to deduct the full amount of £15,860 in the adjustment to profit and this same figure would appear as NTLR income in the CT computation.
Sorry for any misunderstanding.
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