Income Tax - F2

Question 1

What is current tax?

Answer 1

Estimated amount of tax payable on the taxable profits for the period

Question 2

What is an under provision of tax?

Answer 2

Amount settled is more than amount previously recognised

Question 3

What is an over provision of tax?

Answer 3

Amount settled is less than amount previously recognised

Question 4

What is deferred tax?

Answer 4

Estimated future tax consequences of transactions and events recognised in the financial statements of the current and previous periods

Question 5

How do we account for deferred tax?

Answer 5

1. Establish the temporary difference at the year end
2. Calculate the year end deferred tax balance (shown on the SFP)
3. Record the journal entry showing the increase/decrease in the deferred tax balance during the year

Question 6

What is a temporary difference?

Answer 6

Difference between carrying amount of asset/liability in the SFP and its tax base