Taxation

Question 1

Balances on Tax

Answer 1

Debit balance: under-provision
Credit balance: over-provision

Question 2

Increase in deferred tax liability

Answer 2

Dr Income Tax expense/OCI
Cr Deferred Tax (SoFP)

Question 3

Decrease in Deferred Tax Liability

Answer 3

Cr Income tax expense/OCI
Dr Deferred Tax (SoFP)

Question 4

How to: Tax (Ignoring deferred tax)

Answer 4

W1:
PBT, Add back depreciation, Less capital allowance, gives taxable profit, multiply figure by income tax rate to get income tax expense.

Minus this from PBT as per above to profit after expense

Question 5

Tax base calculation

Answer 5

Carrying value of asset minus capital allowance for the year

Question 6

Deferred tax how to:

Answer 6

Calculate the income tax on the difference between the Carrying Value of the asset and the tax base. CALCULATE the difference between the years

Income tax will then be simply tax on the PBT for the SOoPL
The SoFP will be made up of non-current liabilities deferred tax: the increase/decrease
Current Liability will be the difference