Week 25 - Accounting for tax

Question 1

direct tax examples?

Answer 1

(on a person)

• normal tax = 28%
• income tax
• dividends tax = 20%
• cap gains tax

Question 2

indirect tax examples?

Answer 2

(on a transaction)

• VAT
• transfer duty

Question 3

what is current tax?

Answer 3

the amount of inc tax payable/recoverable from the tax profit/loss for the period

Question 4

what is taxable profit?

Answer 4

the P/L for a period upon which taxes are payable/recoverable, determined in accordance with rules established by taxation authorities

Question 5

things to remove from taxable profit?

Answer 5

dividends

depreciation

Question 6

what is tax expense?

Answer 6

current year tax + adjustments to current tax for prior periods

Question 7

journal entry for tax expense?

Answer 7

DR tax expense (P/L)

CR SARS current tax (L)

Question 8

how do tax returns work?

Answer 8

at end of year, company submits a tax return based on how much they calculated they owe SARS. after SARS’s final assessment, they tell the company how much is owed which may be higher or lower than the company’s calculation

Question 9

provisional tax payments?

Answer 9

• made every six months (middle of year, end of year)
• based on company’s estimates of their taxable income for the YOA
• may be top-up payment once SARS finishes their final assessment

Question 10

tax expense in the SOCI?

Answer 10

after profit before tax

Question 11

tax expense in the SOFP?

Answer 11

can be asset (if we overpaid) or liability (if we underpaid)

Question 12

tax expense in the SOCF?

Answer 12

under “CF from operating activities”, show actual tax paid

Question 13

tax expense in the SOCE?

Answer 13

always show RE and reval surplus amounts AFTER tax

Question 14

major components of tax note?

Answer 14

current tax for the period
adjustments for under/over provision of tax
——————
tax expense