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).