Page 31 - PowerPoint Presentation

INCOME TAXES

Prepayments

• Prepayments are amounts actually incurred in the current year and

therefore tax deductible in terms of section 11(a) of the Income Tax Act.

• For accounting purposes, however, the amount is not taken to the

statement of profit or loss and other comprehensive income as a

deduction, but is disclosed as a current asset in the statement of

financial position.

• The temporary difference occurs because the amount will be claimed as

a deduction for tax in the current year, but will only be taken to the

statement of profit or loss and other comprehensive income as an

expense in the following year. The carrying amount will be equal to the

amount of the prepayment and the tax base is Rnil (no amount in the

statement of financial position for tax purposes since it has already been

claimed).
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