Page 36 - Finac1 Test 1 slides - 5. Income Taxes (IAS 12)

INCOME TAXES

Advances - example

• Revenue received in advance is not accounted in the statement of

profit or loss and other comprehensive income in the current year,
but disclosed as a liability in the statement of financial position

• debit – Bank;

• credit – Revenue received in advance

• The amount is taxable in the current year since all amounts
received or accrued are taxed according to the rules of the Income

Tax Act.

• A company has been incorporated in the current year and has
received deposits in advance to the amount of R20 000 from their

customers to book holiday accommodation.

• The accounting profit of the company amounted to R150 000 for

the year ended 31 December 20.12 and the tax rate is 28%.

• Deferred tax is provided on all temporary differences according to
the statement of financial position approach. There is assurance

beyond reasonable doubt that there will be sufficient taxable profit
in the future to realise any tax benefits.

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