Page 265 - F1 Integrated Workbook STUDENT 2018

IAS 12 Income taxes

Solution

At 31 May 20X0 we had an opening liability for tax of $316,000. When we
made the payment of $263,000, this resulted in an over-provision for 20X0 of
$53,000 because we had provided for more tax than we needed to pay.

This credit balance would be shown on the trial balance before the
adjustments were made for the current year's estimated taxation.
Tax
Bank 263,000 Bal b/d 316,000
Bal c/d 53,000
–––––– –––––––
16,000 316,000
–––––– –––––––
Bal b/d 53,000
At 31 May 20X1 the current year tax is estimated at $383,500. This is the
amount that must be shown on the current year statement of financial position
as a liability. It is not the charge to the statement of profit or loss. The
statement of profit or loss charge will be made up of this year's estimated tax
liability but will have the credit for the over-provision made in the 20X0
financial statements.

Tax
Bal b/d 53,000
Bal c/d 383,500 SOPL (Bal) 330,500

––––––– –––––––
383,500 383,500
––––––– –––––––
Bal b/d 383,500

Statement of profit or loss for the year ended 31 May 20X1 (extract)
$
Income tax expense (disclosure note) 330,500
Statement of financial position as at 31 May 20X1 (extract)

Current liabilities
Income tax payable 383,500

Disclosure note
Income tax expense
Current tax 383,500
Over-provision (53,000)
–––––––
330,500
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