Page 179 - FR Integrated Workbook 2018-19

Taxation

Tax

1.1 Tax in the financial statements

The tax expense in the financial statements is made up of two elements

 Current tax – tax payable to authorities in relation to current year activities,
together with any under- or over-provision from the previous year

 Deferred tax – an application of the accruals concept.

Tax expense in SPL = current tax +/– movement in deferred tax

1.2 Accounting for current tax

The accounting entry to record current tax is:

Dr Tax expense (SPL) X

Cr Tax payable (SFP) X

Note that the current liability for taxation will only ever represent the estimate based
on current year profit.

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