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P. 34
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.
